Satoshi Cycle

DEFINITION of 'Satoshi Cycle'

Satoshi Cycle is a crypto theory that denotes to a high correlation between the price of Bitcoin and internet search for Bitcoin.

The term was coined by Bitcoin expert Christopher Burniske on August 2017 when Bitcoin hit a record high.

BREAKING DOWN 'Satoshi Cycle'

Bitcoin is a cryptocurrency that was created by Satoshi Nakamoto, and came into existence on January 2009. Towards the end of the year, the currency had an exchange rate of USDBTC 1,309.03 based off the cost of electricity required to mine one coin. Bitcoin is a virtual, intangible, decentralized digital currency, and transactions made with it cannot be reversed. The digital world accepted Bitcoin as a method of payment mostly due to its characteristic of providing some anonymity to its users.

The token symbol for Bitcoin is BTC. The value of Bitcoin has gone through significant bubbles and busts that has caused an ongoing debate in the economy about the speculative property of the coin. 

While the value of Bitcoin has seen wild up and downswings since its inception, it is clear that the value of the virtual currency is tied to its relevance in the online community. Its relevance is depicted by how many individuals and businesses accept it as a payment for transactions. As of 2017, the price of one BTC is proof that the level of acceptance and adoption of the currency is increasing on a global scale, even to transactions not necessarily conducted online. As news of the rise of Bitcoin spreads, its popularity grows from the rising level of interest drawn to the currency.

The Satoshi Cycle basically states that this rising interest or curiosity in Bitcoin leads to parties running searches for Bitcoin on Google and other search engines. The increasing search hits, in turn, increases the value of Bitcoin. The more Bitcoin rises in value, the more interest in it – the more interest, the higher the price of BTC. And so, the cycle continues. In effect, the rising interest in Bitcoin would lead to increased participation in the use of the currency. The increased participation translates into a higher demand for the coin. Like the stock market which is fueled by demand, an increase in demand for Bitcoin would lead to further increase in its value.

However, critics fear that Bitcoin is simply a bubble, given that its rising value is tied to the heightened curiosity among traders, investors, and hedge funds. Christopher Burninske, after making mention of the “the virtuous Satoshi Cycle” stated that after every bubble there’s a crash. But after eight years of its disruptive entry into the digital world, no one can really state for a fact whether Bitcoin has a limited or unlimited upside trajectory.