That might be the case. If it causes you pain, or is getting progressively worse, I would show it to your doctor when it has 'flared up'. Otherwise, it shouldn't cause you too much of a problem, (other than for appearances).
I have never heard of sebaceous cysts shrinking and growing and shrinking. I have lots of cysts and this has never happened to me.
I have several sebaceous cysts that come and go. One on my wrist, one on my back. They come and go sometimes. Some don't, some do. Just depends on your body.
Now that you mention it, I do know of two cases where cysts disappeared (or became too small to notice). Two of my daughters started using birth-control pills and developed cysts in their breasts. They stopped the pills and the cysts disappeared.