Arthur Hayes argues in his new article “Long Live the King!” that the traditional four-year cycle of Bitcoin may be failing, with new driving mechanisms shifting towards money supply and dollar credit expansion. This article will analyze the rationality and limitations of this viewpoint from multiple dimensions, including market background, on-chain data, driving factors, technical aspects, risks, and strategies.
Market Performance / Background
Recently, Bitcoin and the entire crypto market are in the mid-stage of a bull market. Traditionally, many traders believe in the “Bitcoin four-year cycle”—a peak followed by a downturn occurs every four years after a halving. However, Hayes suggests that as the market reviews historical trajectories and tries to position tops and bottoms based on cycles, this time the situation might be different.
In his view, traditional cyclical models overlook the changes in macro monetary and credit expansion. As he wrote in the text: “The reason historical cycles are effective is that monetary prices and supply, as well as the expansion of credit in dollars and yuan, reach turning points at critical junctures.”
In the current financial environment, if monetary policy continues to be accommodative, Bitcoin may no longer “end” the bull market at the established pace, but rather extend its upward trajectory with a new logic.
On-chain Data and Capital Flow
When determining whether a cycle has failed, on-chain and capital flow data provide important indicators. Here are several key data sets and trends to pay attention to:
Dollar Credit Supply
Hayes cites Federal Reserve data in the text, comparing the dollar credit (bank deposits, non-loan credits, etc.) with Bitcoin prices and the federal funds rate to illustrate the supporting role of monetary expansion in the Bitcoin bull market. He also pays attention to the China Credit Impulse, believing that during the peak phases of past bull markets, the expansion of Chinese credit was one of the important driving forces.
Dollar Reverse Repo / Treasury Issuance Liquidity Injection
Hayes pointed out that the U.S. Treasury releases trillions of dollars into the market by issuing more government bonds to absorb liquidity from reverse repurchase agreements, which is a mechanism that drives “monetary expansion” through fiscal-monetary linkage.
Market Expectations and Interest Rates
Through the interest rate futures market (such as CME FedWatch), the market currently has a high probability of interest rate cuts in October and December (for example, the probability of a rate cut in October is about 94%). Hayes believes that this expectation of monetary easing is an important psychological foundation supporting the current bull market.
On-chain Coin Distribution and Volatility Behavior
Although Hayes's original text does not elaborate much on specific BTC address distribution, transaction counts, and other on-chain details, we can supplement our observations as follows in the current bull market: large holder addresses are holding their coins during the pullback phase, showing weak signs of selling during market panic; small and medium retail investors tend to trade frequently, chasing upswings and downswings. If a large amount of selling pressure from big holders suddenly appears on-chain in the future, it will test whether the bull market is fragile.
These capital flows and on-chain data suggest that the rise of Bitcoin may rely more on macro liquidity and market expectations, rather than being driven solely by the technical cycle.
Drivers: Three Core Logics
Based on Hayes's discussion and in conjunction with the current market situation, I believe the following three points of logic are the most worthy of in-depth exploration:
Currency Depreciation and Credit Expansion as Underlying Drivers Hayes believes that governments and central banks will continue to promote currency issuance and credit expansion to alleviate debt pressure and support the economy. In this environment, Bitcoin becomes a “hedge tool” against fiat currency depreciation. If currencies like the US dollar and the Chinese yuan remain under pressure, the trend of funds flowing into crypto assets may continue.
Policy Linkage and the Evolution of Liquidity Injection Paths In the past, quantitative easing (QE) was the main path for easing. However, at the current stage, fiscal-monetary coupling, reverse repurchase adjustments, treasury bond issuance, and credit tool operations have become more flexible means of injection. Hayes pointed out that the U.S. Treasury absorbs reverse repurchase funds through large-scale treasury bond issuance, thereby indirectly transferring liquidity into the market. This also means that new paths outside of traditional quantitative easing will become the “invisible engine” for the continuation of the bull market.
The Temporal Randomness of the Cyclical Model and the Risk of Model Failure Hayes criticizes the market's mechanical application of the “four-year halving cycle,” arguing that this approach simplifies the extrapolation without considering supply and interest rates or the variables of currency prices. He believes that just because “the past was four years” does not mean that the future must be four years. In his view, the true cycle peak is marked by the inflection point of monetary fundamentals, a slowdown in credit expansion, and a turning point in dollar supply, rather than being precisely “four years after the halving.”
Investment Risks / Risk Management
Any viewpoint has its boundaries, and the following are several risks that need to be vigilant about within this framework:
Reversal Risk
If inflation unexpectedly rises in the future, the central bank may be forced to tighten monetary policy, leading to a significant increase in interest rates and higher capital costs, which may instead trigger a Bitcoin correction.
Policy Intervention and Regulatory Risk
The regulatory attitudes of various countries towards crypto assets have not yet stabilized. If there are significant regulatory changes (such as the restructuring of exchanges or a reversal of ETF policies), it may create phase-specific selling pressure.
Credit Cycle Turning Point Lag
Hayes' logic relies on the continuation of credit expansion, but credit expansion is cyclical. Once the turning point arrives and the market has not predicted it in advance, it may lead to a “disconnection” risk.
Market Sentiment and Leverage Squeeze Risk
If most funds are driven by leverage, the retracement phase may be amplified, triggering forced liquidations and a chain reaction.
Model Dependency Risk
Although Hayes's model provides a new perspective, its assumptions about credit expansion and the relationship with the money supply may deviate in different economic systems and global contexts.
Risk management recommendations include: controlling positions, buying in batches, setting stop-losses, maintaining fund flexibility, paying attention to unexpected macro policies, and avoiding excessive leverage.
Strategy Recommendations
Based on the above analysis, it is recommended that investors consider the following strategy combinations:
Mainstream assets as core allocation
Bitcoin and Ethereum can still be used as core asset allocations, gradually building positions using macro liquidity logic, entering in batches.
Timing to increase positions and buying on dips
If it retraces to the key support zone in the medium to long term, you can increase your position in batches; avoid blindly chasing the rise.
Moderate allocation to high-risk assets / derivatives
For investors with a higher risk tolerance, a portion of leverage and options can be allocated within the overall position, but stop-loss and risk control must be set properly.
Maintain Flexibility / Exit Preparation
If there is a major reversal in monetary policy, unexpected regulatory events, or an early arrival of the credit turning point, positions should be quickly adjusted. Avoid going “all in and risking everything.”
Observe macro variables as direction confirmation
Closely monitor macro indicators such as US interest rates, credit data, government bond issuance, and changes in reverse repurchase scale as entry or exit signals.
Conclusion
Arthur Hayes challenges the traditional four-year cycle thinking of Bitcoin in “Long Live the King!”, emphasizing that the true underlying forces driving Bitcoin's market are monetary supply, credit expansion, and liquidity injection. As a commonly quoted investment adage states: “Investing is not about finding answers, but about adapting to the environment.” In this changing landscape, Bitcoin's “kingly status” may not be the end, but rather a new starting point. Risks and opportunities coexist, and investors must remain cautious and flexible to go further.
Disclaimer: This article is for informational purposes only and does not constitute any investment advice. The cryptocurrency market is highly volatile, and investors should make decisions with caution.
