Understanding the Bitcoin Cycle
Bitcoin has historically followed a predictable four-year price cycle, often centered around an event known as the halving. This cycle has typically involved a period of price appreciation leading up to the halving, followed by a significant drop in value after the event. However, recent developments have begun to challenge this traditional pattern.
The halving is a key event in the Bitcoin ecosystem, occurring roughly every four years. During this event, the block reward given to miners is cut in half, effectively reducing the rate at which new bitcoins are introduced into the market. This mechanism is hard-coded into Bitcoin’s protocol and ensures that the total supply of Bitcoin will never exceed 21 million.
Historically, Bitcoin would experience a surge in price following the halving, eventually reaching new all-time highs. Afterward, it would typically decline by about 70% to 80%, marking the start of a “crypto winter” — a prolonged period of depressed prices for cryptocurrencies. However, the most recent halving in April 2024 did not follow this pattern, indicating a potential shift in the market dynamics.
The Impact of ETFs and Institutional Investors
One of the major factors contributing to the disruption of the traditional Bitcoin cycle is the introduction of Bitcoin exchange-traded funds (ETFs). These financial instruments allow investors to gain exposure to Bitcoin without directly owning the cryptocurrency. The U.S. approval of Bitcoin ETFs in January 2024 marked a significant milestone, as it brought in substantial institutional investment.
This influx of capital from traditional institutional investors has altered the way Bitcoin is perceived and traded. Unlike previous cycles, where the price rally was delayed until after the halving, the last halving saw Bitcoin reach a record high of over $73,000 in March 2024, just a month before the event. This unprecedented reaction suggests that the influence of institutional investors is reshaping the traditional cycle.
Other Influencing Factors
In addition to ETFs, several other factors have contributed to the changing landscape of Bitcoin’s price cycle. Matthew Hougan, chief investment officer at Bitwise Asset Management, highlighted the role of “blowups in crypto,” such as the collapse of initial coin offerings (ICOs) in 2018 and the failure of the FTX exchange in 2022. These events have led to increased regulatory scrutiny and a more cautious approach from investors.
On the regulatory front, there has been a noticeable shift toward a more supportive environment for cryptocurrencies. Interest rates are expected to decrease in the coming year, and regulators are now engaging with the crypto industry rather than resisting it. This change in attitude has reduced the risk of future market crashes.
Moreover, public companies are increasingly accumulating cryptocurrencies, particularly Bitcoin, as part of their investment strategies. This trend reflects growing confidence in the long-term value of Bitcoin and its role in the broader financial ecosystem.
Where Are We Now?
According to Saksham Diwan, research analyst at CoinDesk Data, the most significant price appreciation for Bitcoin historically occurred between days 500 and 720 post-halving. If this pattern were to repeat, the next period of potential acceleration could be expected between Q3 2025 and early Q1 2026. However, the current cycle has shown notably subdued price action compared to previous post-halving periods.
Matthew Hougan of Bitwise Asset Management believes the four-year cycle is over but emphasizes that it will only be officially declared dead if Bitcoin experiences strong performance in 2026. He acknowledges that while volatility remains, the forces that once drove the four-year cycle are weaker, and new factors are influencing the market on a different timeline.
The Future of Bitcoin Price Movements
A notable feature of previous cycles was the significant drop in Bitcoin’s price following the halving, typically ranging from 70% to 80%. However, industry insiders suggest that this pattern may no longer hold. Ryan Chow of Solv Protocol stated that the era of brutal 70–80% drawdowns is behind us.
He pointed out that the largest correction in the current cycle has been around 26%, significantly lower than the 84% drop after the 2017 all-time high and the 77% drop after the 2021 peak. Long-term holders and steady institutional inflows are contributing to greater downside absorption, suggesting that future corrections may be shorter and less severe.
Matthew Hougan also noted that while 30% to 50% falls are possible, he believes 70% pullbacks are a thing of the past. This shift in market behavior highlights the evolving nature of Bitcoin’s price cycle and the increasing influence of institutional investors and macroeconomic factors.