The Supercycle Theory Is Dead

Why the four-year Supercycle theory doesn’t hold true anymore

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Hey DEFI TIMES community,

The Supercycle theory is dead. It’s just doesn’t hold true in our current environment anymore.

The Supercycle theory has been discussed for years now. In my opinion, it’s completely outdated.

To understand why this is the case, we first need to understand what the theory is based upon. It basically goes like this:

The crypto bull cycle is kicked off by the Bitcoin halving, which occurs every four years.

As Bitcoin’s inflation rate decreases and demand for the asset increases, price appreciates and a bubble evolves… which eventually pops. After a long bear market, the Bitcoin halving will get another bull market underway - and the cycle repeats itself!

Until today, the theory was a self-fulfilling prophecy. Everyone believed in it and that’s why it was true.

But now, things have changed and the crypto market has matured. The ecosystem has grown up! Bitcoin isn’t the only product on the market anymore.

And as Bitcoin’s dominance shrinks, the Supercycle theory might cease to exist.

Here’s why!

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The Supercycle Theory Is Dead

New Asset Classes On the Rise

The crypto environment nowadays looks completely different from what it was in 2017. Back then, the only protocols that had some traction were Bitcoin and Ethereum. But apart from that… nothing really took off!

If you’ve been through the 2017 cycle, you know that every single ICO collected money based on shiny whitepapers and high expectations. Very few projects actually shipped their products.

Even though Ethereum has found its first true use case (ICOs), nothing was being built apart from that!

Long story short, the bubble popped because people realized how irrational the market was. Projects - without a working product - were valued at billions of dollars.

If you compare the market situation to today, you notice that everything has changed. Here are a few ecosystems that we could only dream about in 2017:

  • NFT Market: Even though we had our first NFT projects in 2017 (CryptoPunks, CryptoKitties), it was only until 2020 that they went mainstream. It took a long time for the market to get used to JPEGs. But now, there is a flourishing NFT ecosystem on Ethereum and beyond.

  • DeFi Ecosystem: In 2017, the MKR and SNX ICO took place - of course, without a working product. However, the term “DeFi” didn’t even exist at that point. If you were a normal market participant in 2017, you probably never heard of DeFi or Open Finance. Even if you did, you probably didn’t even think that DeFi would ever work out. Only in 2019, DeFi really took off. And now, DeFi is growing at an exponential rate!

  • Multi-Chain World: In 2017, Bitcoin and Ethereum had some kind of network effect. Can you think of anything else? Maybe Dogecoin?! Well, there’s a particular reason for that. In fact, we didn’t have any working chains that could process transactions. Polkadot, Cosmos, Solana, and co were only ideas at that point. Today, most of them are live and are developing their own ecosystem and network effect.

All of these ecosystems didn’t exist in 2017, and our industry has significantly advanced since then. We now have working products - unthinkable back then!

We only could have dreamed of millions of daily active addresses, protocols with billions of dollars locked, and unicorns in the crypto industry.

That’s where we are now. And believe me: the growth rate is not going to get slower. This is exponential growth!

Bitcoin Is Only Part of Our Ecosystem

Things have changed dramatically since the last cycle, which is the last time the Supercycle theory held true. Back then, Bitcoin was by far the most dominant cryptocurrency. Well, not anymore!

We are building nothing less than a global financial system on the blockchain. And Bitcoin is only part of it. Even though Bitcoin is still the biggest cryptocurrency as measured by market cap, it’s only one use case of DeFi: a store of value!

While the Supercycle theory is strictly based on Bitcoin’s halving, it does not consider all other applications and protocols in DeFi!

The Supyercycle theory held true in a world where only Bitcoin had a product-market fit! Our ecosystem has changed by now, and we have grown beyond our wildest expectations from 2017.

The question is whether the Supercycle theory turns out to be correct in a world where innovation is totally independent of Bitcoin.

Innovation Is Independent of Bitcoin

The emergence of DeFi could kill the Supercycle theory completely. Why? The theory basically considers Bitcoin as the main driver of hype and speculation. Things have changed by now.

DeFi is a whole new ecosystem, that has the potential to replace Bitcoin’s dominance. Just look at what happened during the last 12 months. DeFi has grown into a billion-dollar industry. It went from zero to one!

Consider the following: According to the Supercycle theory, we would see a bubble by the end of 2021. After that, we would see a two-year bear market. However, the growth of DeFi is not likely to stop anytime soon. 

The last bear market was mainly due to lack of innovation… nothing happened!

Are we really likely to see another bear market in an environment where new and exciting apps are built every single day?

In my opinion, we most likely won’t!

Whenever you try to predict the future based on past events, you have to ask yourself whether the facts changed!

In this case, they have.

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DISCLAIMER: All information presented above is meant for informational purposes only and should not be treated as financial, legal, or tax advice. This article's content solely reflects the opinion of the writer, who is not a financial advisor.

Do your own research before you purchase cryptocurrencies. Any cryptocurrency can go down in value. Holding cryptocurrencies is risky.