Bitcoin and cryptocurrency investors have been eagerly waiting for bitcoin’s next breakout—if it ever comes.
The bitcoin price, on track to be one of the year’s best performing assets, remains far from its all-time high of around $20,000 set in late 2017.
Now, Silicon Valley venture capital firm Andreessen Horowitz has forecast a “fourth crypto cycle” could be on the horizon—potentially sending the bitcoin price sharply higher.
“The 2017 cycle spawned dozens of exciting projects in a wide range of areas including payments, finance, games, infrastructure, and web apps,” Andreessen Horowitz partners Chris Dixon and Eddy Lazzarin wrote in a blog post.
“Many of these projects are launching in the near future, possibly driving a fourth crypto cycle.”
Last month, Andreessen Horowitz announced its second $515 million bitcoin and crypto fund, adding to the $300 million fund it launched in mid-2018.
The 2020 fund raising smashed the original $450 million target and will be dedicated to cryptocurrency and blockchain projects—specifically decentralized finance, next-generation payments and the decentralized internet.
“Even though crypto cycles look chaotic, over the long term they’ve generated steady growth of new ideas, code, projects, and startups—the fundamental drivers of software innovation,” Dixon and Lazzarin wrote, adding “people who’ve been in crypto for a long time view the space as evolving in cycles, alternating between periods of high activity and ‘crypto winters.'”
The VC firm identifies an “underlying order” to the first three 2011, 2013 and 2017 bitcoin and crypto cycles. First, the price of bitcoin and other cryptocurrencies rises, leading to new interest and social media activity.
New users get involved, contributing new ideas and code and creating projects and startups. These product launches inspire more people, “eventually culminating in the next cycle.”
The bitcoin and crypto price-innovation cycle model is based on anecdotal evidence and data, according to Dixon and Lazzarin.
“Anecdotally, of the hundreds of conversations with crypto founders we’ve had, we often hear stories like: ‘I heard about crypto in [2011, 2013, 2017] when the prices spiked and everyone was talking about it. At first, I thought it was just about money, but then I started reading white papers and blog posts, learned more about the potential of the technology, and eventually fell in love with it.'”
The firm has also “analyzed 10 years of data, including Reddit comments in crypto subreddits, Github commits in crypto repos, and Pitchbook funding data.”
Meanwhile, the bitcoin and cryptocurrency community is still readjusting following a planned supply squeeze that saw the number of new bitcoin being created cut by half.
Earlier this month, the number of bitcoin rewarded to those that maintain the bitcoin network, called miners, was cut by half—dropping from 12.5 bitcoin to 6.25.