What Was the Satoshi Cycle?
The Satoshi Cycle was a cryptocurrency idea that attempted to correlate Bitcoin's price and Internet search volume for the word "Bitcoin" and related terms. The correlation was proposed by Christopher Burniske in August 2017 when Bitcoin hit a record high. It was displayed on a graph via his Twitter account.
The name is derived from the anonymous Bitcoin creator, Satoshi Nakamoto.
- The Satoshi Cycle was a term coined by Christopher Burniske via his Twitter account in August 2017 to describe an apparent correlation between Google search volume and Bitcoin's price.
- Burniske interpreted the cycle as an indicator that increased interest in Bitcoin had led to a further increase in its price, and price increases led to further interest.
- The Satoshi Cycle was not analyzed any further beyond a comparison of two graphs that demonstrated a correlation, but not causation or an actual relationship.
Understanding the Satoshi Cycle
Bitcoin (BTC) is a cryptocurrency created by Satoshi Nakamoto and launched in 2009. One BTC was worth $0.29 at the end of 2010. One BTC was worth around $30,000-plus in April 2023. Bitcoin's value has cycled up and down, sometimes significantly, since its inception. When its price is viewed on a graph, it oscillates up and down.
Internet searches for the term "bitcoin" also oscillate up and down. The graph showed that searches generally increased around the same time that Bitcoin's price moved up. Burniske created this graph showing Google search trends and Bitcoin price movements.
Burniske stated that the increase in Bitcoin price drove a rise in interest, and the rise in interest then drove the prices higher. Burniske, a Bitcoin enthusiast, interpreted this as a positive development that indicated a growing interest in cryptocurrency.
Bitcoin Price History
Bitcoin was initially a niche movement among computer enthusiasts, cypherpunks, and people interested in hiding their economic activity from the government. Message boards had lively discussions about Bitcoin's possibilities, but few people outside these groups knew that Bitcoin existed.
Ross Ulbricht created Silk Road, the first darknet market, in 2011. Silk Road sold mostly drugs, although many other illegal goods and services were sold through the platform as well. It was notable because it relied on the perceived anonymity of Bitcoin to transact digital payments. The FBI confiscated over 170,000 bitcoins worth tens of millions of dollars when it shut down Silk Road in 2013 and arrested Ulbricht.
Bitcoin's price surged from $200 to over $1,000 during this period of growing notoriety.
It's more likely that Internet searches coincided with Bitcoin price because it had begun gathering more interest around 2017 that did center around prices. But a search for Bitcoin price history and Google search trends reveals no relationship following that period.
Bitcoin fell from its 2013 highs over the course of two years. Its price hovered around $300 as its reputation continued growing. Its price began a long, slow appreciation in 2016 that peaked at more than $19,000 in 2017.
The general public started to take notice of the rising prices at the same time. Internet searches for "Bitcoin" began to grow as the cryptocurrency entered mainstream discourse. But the cryptocurrency's price fluctuated significantly between 2017 and 2020.
Then the economy slowed when the COVID-19 pandemic hit in 2020 and investors feared losses were on the horizon. Bitcoin's popularity surged, and its price followed.
Bitcoin again reached all-time highs toward the end of 2020 and into 2021. This rise was coupled with further interest in Bitcoin from institutions, including prominent tech corporations like Tesla, Microstrategy, and Apple, which all announced billion-dollar purchases of the cryptocurrency.
Bitcoin reached a record spot price of $69,000 on Nov. 9, 2021, shortly after the first Bitcoin-linked exchange-traded fund was introduced. It then plummeted over the following months, reaching $38,000 in January 2022.
Is the Satoshi Cycle a Valid Indicator?
The Satoshi Cycle is an observation of an interesting phenomenon: An asset's price went up and the term trended in Google searches. But what caused the apparent relationship? Was demand rising or supply falling? Investors' irrational exuberance could filter to financial media outlets, which would report on the investing frenzy. People could search for information as the price was rising.
There are too many other factors that could play into the rise and fall of search trends and Bitcoin price to assume that one causes the other. It might be more of an indicator of interest or sentiment than influence.
Regardless, it's important to note that Bitcoin has substantially impacted financial technology, the finance industry, and investing. It has popularized the idea of blockchain technology for "trustless" transactions while influencing discussions of the benefits of digital currencies over fiat and paper money.
Frequently Asked Questions
What are Bitcoin 4-year cycles?
Bitcoin is structured to halve the block reward every 210,000 blocks. This takes roughly four years. The next halving is expected sometime in early 2024.
What are Satoshi coins?
Satoshi is the lower denomination for Bitcoin, similar to cents for dollars. There are 100 million Satoshi per Bitcoin.
What is HODL in Bitcoin?
HODL is the intentional misspelling of the word "hold." It became popular in the community after being misspelled in a forum, and it's made its way into mainstream use. It refers to a buy-and-hold strategy in cryptocurrency investing called hodling (holding).
The Bottom Line
The term "Satoshi Cycle" came into being in August 2017 to describe what appeared to be a correlation between Google search volume and Bitcoin's price. But the issue was never subject to further analysis to determine if there was actually a relationship. The concept of the Satoshi Cycle might be more of a gauge of interest than actual influence, so investors shouldn't rely on it.
Investing in cryptocurrencies and other Initial Coin Offerings (“ICOs”) is highly risky and speculative, and this article is not a recommendation by Investopedia or the writer to invest in cryptocurrencies or other ICOs. Each individual's situation is unique so a qualified professional should always be consulted before making any financial decisions. Investopedia makes no representations or warranties as to the accuracy or timeliness of the information contained herein. As of the date this article was written, the author does not own Bitcoin.