Is the Bitcoin Cycle Changing?
With a changing investor profile and an increasingly friendly regulatory environment, bitcoin’s historical “cycle” is showing signs of being broken, reshaping market dynamics. If this once-predictive pattern is broken, it will have major implications for how investors assess cryptocurrency price movements and potential entry timings.
Bitwise Asset Management’s Chief Investment Officer Matthew Hougan stated, “The cycle isn’t officially over until you see positive returns in 2026. But I think we’re going to see it, so let’s just say this: I think the four-year cycle is over.”
What is the Bitcoin Cycle?
Typically, the bitcoin cycle refers to a four-year pattern of price movement that is shaped around a key event known as the “halving,” an adjustment to bitcoin mining rewards that is written into the code.
The halving occurs approximately every four years, with the most recent taking place in April 2024, while the one before that was in May 2020.
When the halving occurs, the rewards given in the form of bitcoin to so-called “miners” (entities that maintain the bitcoin network) are slashed in half, reducing the new supply of bitcoin into the market. Consequently, there will only ever be 21 million bitcoins.
Typically, bitcoin will rise in the months after a halving and eventually reach an all-time high. Then, bitcoin will crash, falling around 70% to 80% from the peak, ushering in a “crypto winter,” a prolonged period of slump in digital currency prices.
Other cryptocurrency prices will also fall dramatically during this period. Subsequently, bitcoin’s price will consolidate for a period, and as the next halving approaches, its price will typically start to appreciate. Then, the cycle repeats again.
What's Changed in the Bitcoin Cycle?
The market has seen an unprecedented reaction around the most recent halving. Bitcoin hit an all-time high above $73,000 in March 2024, about a month before the halving, rather than making new highs after the highly anticipated event as expected.
“In every prior cycle, new all-time highs have emerged 12-18 months post halving,” noted Saksham Diwan, a research analyst at CoinDesk Data.
The main factor driving bitcoin to new highs this cycle was the approval in the U.S. of spot bitcoin exchange-traded funds (ETFs), which began trading in January 2024, enabling investors to gain exposure without actually owning the cryptocurrency.
Large amounts of money flowing into the ETFs, plus the hope that this would attract more traditional institutional investors who had been wary of cryptocurrency before, together helped propel bitcoin’s price.
Diwan: “This time around, demand from spot bitcoin ETFs has essentially front-run the typical post-halving price discovery process. This is indeed the first explicit sign that institutional flows might be changing the traditional cycle dynamics.”
What Factors Changed the Bitcoin Cycle?
ETFs are the first major factor breaking the bitcoin four-year rhythm. It brought in investors with deep pockets that have an interest in holding the cryptocurrency long term, but many other market factors have also changed.
Hougan, of Bitwise Asset Management, pointed to those “crypto blow-up events” that often happen before a “crypto winter.” He pointed to the collapse of the so-called initial coin offerings (ICOs) in 2018, and to the collapse of crypto exchange FTX in 2022.
Meanwhile, the macro environment and regulatory policies are becoming more favorable.
Hougan said, “The odds of interest rates going down over the next year are higher than the odds of them going up, and regulators and legislators are now willing to engage with the crypto industry, rather than flat-out refusing to deal with related issues, which would dramatically lower the risk of future blow-up events.”
Former U.S. Securities and Exchange Commission Chairman Gensler had cracked down on the industry and brought lawsuits against numerous crypto firms. Industry insiders said they were being unfairly targeted.
Under the current administration of U.S. President Trump, the U.S. SEC has dropped cases against some crypto firms. Washington has set about introducing new laws for cryptocurrency and has even launched a strategic bitcoin reserve.
Meanwhile, publicly listed companies are accumulating cryptocurrency (especially bitcoin) as a new strategy.
Solv Protocol Co-Founder Ryan Chow said, “With a maturing market, long-term holder accumulation at all-time highs, and decreased volatility, the traditional four-year rhythm is being superseded by more liquidity-sensitive and macro-correlated behavior.”
What Stage of the Cycle Are We In Now?
CoinDesk Data’s Diwan noted that a key point is that, historically, bitcoin’s most significant price appreciation has occurred between 500 and 720 days post halving. Diwan mentioned that bitcoin peaked within this window in the 2016 and 2020 cycles.
“If this pattern repeats, then we should watch for potential accelerated upside between Q3 2025 and early Q1 2026,” Diwan said, adding that “price action this cycle has been markedly more muted compared to prior post-halving periods.”
Bitwise Asset Management’s Hougan said that the four-year cycle is over, but that to officially declare its death, bitcoin needs to perform well in 2026, which he anticipates it will.
Hougan said in an emailed comment, “I don’t think we’ve eliminated volatility, but I think, first, that the forces that historically caused a four-year cycle are weaker than they used to be; and second, that there are other very powerful forces playing out on a different timeline, and I think those forces will overwhelm our four-year cycle tendencies.”
Bitcoin’s latest all-time high was recorded on July 14, when its price crossed $123,000.
Will an 80% Crash Be a Thing of the Past?
A notable characteristic of past cycles is that bitcoin would crash around 70% to 80% from its all-time high after the halving. However, crypto industry insiders believe that this will no longer happen, given the reasons they have listed for the four-year cycle changing.
Solv Protocol’s Chow said, “We believe the era of those brutal 70%–80% drawdowns is behind us.”
He pointed out that the largest correction seen this cycle (based on closing prices) has been around 26%, while the post-2017 and post-2021 all-time high corrections were around 84% and 77% respectively.
Chow said that bitcoin’s long-term holders, as well as “steady institutional inflows” are bolstering the market’s downside buffer. He added that the market might experience corrections in the 30% to 50% range, “in response to macro shocks or regulatory surprises,” but that these corrections “are likely to be shorter and less severe than prior cycles.”
Hougan also said that 30% to 50% drawdowns are possible, but: “I’d bet that 70% drawdowns are a thing of the past.”
TH
