It’s a crypto centric week at Unhedged Capitalist headquarters. All the action is in blockchain right now, or the Ponzi sector as Kuppy affectionately calls it, but I promise we’ll return to our regularly scheduled programming soon.
Today I want to share Bob Loukas’s 4 year Bitcoin cycle framework, since it’s near and dear to my heart. I can’t precisely quantify the number, but I estimate my net worth is 30% higher than it would be if I hadn’t discovered Bob back in 2018. In this short article I’ll introduce you to the cycle, explain why now might be a good time to buy crypto, and I’ll end this article by illustrating the cycle’s key weakness. Let’s go.
The cycle
Bob Loukas uses a 4 year cycle to identify tops and bottoms in the crypto market. The historical accuracy of the cycle is impressive. I watched my first Bob Loukas video in 2018. In that video Bob correctly identified when the crypto market would peak three years later in 2021. Pretty neat!
Bob released a new video a few days ago (see below) and I’d recommend that you check it out. However, for our purposes there’s really one factor that matters. According to the cycle theory, the low we’re about to experience in the crypto markets is likely to be a major, multi-year bottom. In the video Bob says that he’s looking for a bottom sometime in November or December, but given recent events it’s reasonable to expect that the low will come in the next week or two.
What does it all mean? The key point is that the next few days could be a fantastic buying opportunity, with a high expected return on a multi-year time frame.
My money is with my mouth on this. As I wrote in my previous article, I have a large buy order set for $1,050 on Ethereum. Of course we could go quite a bit lower, but I’m going to play it relatively conservative on my price target. If ETH drops below $800, I’ll simply buy more.
When will the cycle top?
If you watch the video you’ll know that Bob thinks there’s a chance that the next cycle might peak earlier than expected. If that’s the case, then we could be looking at end of 2023 or beginning of 2024 for a blow off top in crypto. If the cycle acts normally then we might expect a peak at the end of 2024 or beginning of 2025. We shall cross that bridge when we come to it.
The problem with the cycle theory
In 2018 Bob called for Bitcoin to top out around $150,000 to $200,000. Although he was spot on for timing, the price action failed to materialize. That’s understandable, nobody has a crystal ball, but where I think Bob went a bit wrong is that he kept sticking to his model even as financial conditions were deteriorating.
The stimmies were wearing thin, QE was going out the window, inflation was on the rise, etc. There were a lot of macro factors that were gumming up the economic engine. Unfortunately, instead of addressing these roadblocks Bob stuck with his model and price target and as a result he failed to sell near the high (he sold for a mere 800% price gain instead).
The 4 year crypto cycle model worked remarkably well when rates were falling, QE was abundant and inflation was far from anyone’s mind. It’s less clear that the model will continue to hold up in the face of macro headwinds, and that’s absolutely a factor to consider. That being said, I’m going to say that on a balance of probabilities the model is still useful, albeit more helpful for timing than price.
In summary
The key point I hope to convey is the following: as investors we cannot predict the future. We can only make estimated guesses and try to get probabilities on our side. As such, according to Bob Loukas and his 4 year cycle of crypto, the next week might give us a multi-year low in the crypto markets and hence an excellent buying opportunity. While we cannot deal in certainties, the 4 year cycle has historically proven to be fairly accurate. Plan accordingly.
