The once predictable four-year cycle of the cryptocurrency market is becoming less prominent, according to Sandeep Nailwal, co-founder of Polygon.
He suggests that the maturation of the crypto market and increasing institutional involvement have altered the dynamic, making the market less reliant on traditional speculative patterns. Nailwal explained that while high interest rates in the U.S. and low liquidity have dampened speculative activity, this trend will shift once interest rates are reduced and political stability returns.
Nailwal also noted that while major price corrections of 30-40% could still occur between market cycles, the extreme 90% drawdowns typically seen in crypto might become less frequent as the market matures. He believes that, particularly for well-established cryptocurrencies, market behavior will become more professional and stable, even though the halving event for Bitcoin will continue to influence market movements.
In addition to the broader market changes, Nailwal pointed to several factors that have distorted the traditional four-year market cycle. One such influence is the Trump administration’s establishment of a Bitcoin strategic reserve, which he sees as a move that has legitimized crypto in the eyes of institutional investors. This has led to new capital flows and, in turn, more stability within the market.
Moreover, the introduction of exchange-traded funds (ETFs) has also had a significant impact by creating a more stable price environment for cryptocurrencies associated with these funds. Since ETFs do not offer direct ownership of the underlying assets, they prevent capital from freely flowing between different crypto assets, further disrupting traditional market cycles.
Nailwal also pointed out that macroeconomic factors, such as geopolitical uncertainty and inflationary pressures, continue to impact investor behavior, pushing them away from higher-risk digital assets towards more stable investments like cash and government bonds.
Editorial Team
Reporter at Coindoo
Source: https://coindoo.com/is-the-4-year-crypto-cycle-over-polygon-co-founder-weighs-in/