The four-year cycle of Bitcoin has ended, replaced by a more predictable two-year cycle.

Written by: Jeff Park

Compiled by: AididiaoJP, Foresight News

Bitcoin has historically followed a four-year cycle, which can be described as a combination of mining economics and behavioral psychology.

Let's first review the meaning of this cycle: each halving mechanically reduces new supply and tightens miner profit margins, forcing weaker participants to exit the market and thereby reducing sell pressure. This subsequently reflexively pushes up the marginal cost of new BTC, leading to a slow but structural supply contraction. As this process unfolds, fervent investors anchor themselves to the predictable halving narrative, creating a psychological feedback loop. The loop is: early positioning, price increases, media attention going viral, retail FOMO, ultimately leading to leveraged mania and ending in a crash. This cycle is effective because it is a combination of programmatic supply shocks and the reflexive herd behavior that seems reliably triggered.

But this is the past Bitcoin market.

Because we know that the supply part of the equation is less effective than ever before.

The circulating supply of Bitcoin and the decreasing marginal inflation impact

So what should we expect for the future?

I propose that in the future, Bitcoin will follow a “two-year cycle,” which can be described as a combination of fund manager economics and behavior psychology dominated by ETF footprints. Of course, I have made three arbitrary and controversial assumptions here:

Investors are evaluating their investments in Bitcoin within a one to two-year timeframe (rather than longer, as this is how most asset management firms operate in the context of liquid fund management. These are not closed-end structures for private equity / venture capital that hold Bitcoin. It also unreservedly assumes that financial advisors and registered investment advisors operate under a similar framework.)

Regarding the “new sources of liquidity injection”, the capital flows from professional investors through ETFs will dominate the liquidity of Bitcoin, and the ETF will become a proxy indicator that needs to be tracked;

The selling behavior of veteran whales remains unchanged / not considered as part of the analysis, and they are now the largest supply decision-makers in the market.

In asset management, there are several important factors that determine the flow of funds. The first is the risk of joint holders and the year-to-date profit and loss.

Regarding the risk of common holders, this refers to the concern that “everyone holds the same thing,” so when liquidity is one-sided, everyone needs to make the same trades, thereby exacerbating potential trends. We usually see these phenomena in sector rotation (thematic concentration), short squeezes, pair trading (relative value), and in situations involving erroneous merger arbitrage / event-driven scenarios. However, this situation is also common in multi-asset fields, such as in CTA models, risk parity strategies, and of course in fiscal-led trades where stocks represent asset inflation. These dynamic factors are difficult to model and require a lot of proprietary information about positions, making it hard for ordinary investors to access or understand.

But it is easy to observe the profit and loss from the beginning of the year to now in point 2.

This is a phenomenon in the asset management industry that operates on a calendar year cycle, as fund fees are standardized annually based on performance as of December 31. This is particularly evident for hedge funds, which need to standardize their accompanying interests before the end of the year. In other words, when volatility increases near the year's end, and fund managers do not have enough “locked-in” gains or losses as a buffer from earlier in the year, they become more sensitive to selling their highest-risk positions. This relates to whether they can secure another opportunity in 2026 or be dismissed.

In “Capital Flows, Price Pressure, and Hedge Fund Returns,” Ahoniemi & Jylhä recorded that capital inflows mechanically drive up returns, which in turn attract additional capital inflows, ultimately reversing the cycle, with the complete return reversal process taking nearly two years. They also estimated that about one-third of hedge fund reports are actually attributable to these fund flow-driven effects, rather than the skills of the managers. This creates a clear understanding of the potential cyclical dynamics, where returns are largely shaped by investor behavior and liquidity pressures, rather than solely determined by the performance of the underlying strategies, factors that dictate the latest fund flows into the Bitcoin asset class.

Therefore, considering this, imagine how fund managers evaluate positions like Bitcoin. In front of their investment committee, they are likely to argue that Bitcoin's annual compound growth rate is around 25%, and therefore need to achieve over 50% compound growth within that time frame.

In Scenario 1 (established until the end of 2024), Bitcoin rose by 100% in one year, which is great. Assuming that the 30% annual compound growth rate proposed by Saylor is the “institutional threshold”, then achieving this in one year is equivalent to achieving 2.6 years of performance.

However, in Scenario 2 (from early 2025 to now), Bitcoin has dropped by 7%, which is not good. Investors who entered on January 1, 2025, are now in a loss position. These investors now need to achieve over 80% returns within the next year or 50% returns within the next two years to reach their threshold.

In scenario 3, those investors who have held Bitcoin since its inception until now / by the end of 2025 have seen their returns increase by 85% in about 2 years. These investors are slightly above the 70% return needed to achieve a 30% annual compound growth rate within that time frame, but not as much as they observed when they reached this level on December 31, 2025, which poses a significant question for them: Should I sell now to lock in profits, take my gains, and win, or let it run longer?

At this point, rational investors in the fund management business would consider selling. This is due to the reasons I mentioned above.

Fee Standardization

Protect Reputation

Proving “risk management” as a combination of a premium service with a continuous flywheel effect.

So what does this mean?

Bitcoin is now approaching an increasingly important price of $84,000, which is the total cost basis for ETFs since their inception.

But just looking at this picture is not complete. Take a look at this chart from CoinMarketCap, which shows the net capital flow per month since its establishment.

You can see here that most of the profits and losses come from the year 2024, while almost all ETF fund flows in 2025 are in a state of loss (except for March). Considering that the largest monthly inflow of funds occurred in October 2024, when the price of Bitcoin had already reached 70,000 USD.

This can be interpreted as a bearish pattern, as those investors who invested the most funds by the end of 2024 but have not yet reached their return threshold will face decision points in the coming year as their two-year term approaches. Meanwhile, investors who invested in 2025 will need to perform exceptionally well in 2026 to catch up, which may lead to premature stop-loss exits, especially if they believe higher investment returns can be obtained elsewhere. In other words, if we enter a bear market, it won't be due to the four-year cycle, but because the two-year cycle has never allowed new capital from fund managers to enter at the appropriate entry point relative to exiting investors taking profits.

In October 2024, the closing price was $70,000. In November 2024, the closing price was $96,000. This means that when the one-year term arrives, their thresholds are set at $91,000 and $125,000 respectively (I admit this is too rough because it does not consider monthly prices and needs to be adjusted more appropriately). If you take a similar approach for June 2025 (which is the month with the largest capital inflow from the beginning of the year to date), then a price of $107,000 means that by June 2026, $140,000 will become a threshold. You will either succeed in reaching it or fail again. By now, you can likely intuitively understand that comprehensive analysis combines all these capital flows with time-weighted averages.

As shown below, we are at a turning point. If we drop 10% from here, the assets under management of the Bitcoin ETF may return to the level we started at the beginning of the year (10.35 billion USD).

All of this indicates that monitoring not only the average cost basis of ETF holders but also the moving average of the gains and losses by entry period is becoming increasingly important. I believe these will become a source of pressure for liquidity supply and circuit breaker mechanisms in future Bitcoin price actions that is more significant than the four-year cycle in history. This will lead to a “dynamic two-year cycle.”

The second most important conclusion here is that if the price of Bitcoin does not fluctuate, but time moves forward (whether you like it or not, it will!), this is ultimately unfavorable for Bitcoin in the institutional era, as the investment returns of fund managers are declining. Asset management is a business about “cost of capital” and relative opportunities. So if the investment returns of Bitcoin decline, not because it rises or falls, but because it consolidates, this is still unfavorable for Bitcoin and will lead investors to sell when their investment returns are compressed below 30%.

In summary, the four-year cycle has definitely come to an end, but the departure of old tricks does not mean there are no new tricks to play. Those who can understand this specific behavioral psychology will find a new cycle to operate within. This is more difficult, as it requires more dynamism in terms of capital flow under the understanding of cost-based backgrounds, but ultimately, it will reaffirm the truth about Bitcoin, which will always fluctuate based on marginal demand and marginal supply, as well as profit-taking behavior.

It is just that buyers have changed, and the supply itself has become less important. The good news is that these buyers, acting as agents of others' funds, are more predictable, and the reduced importance of supply constraints means that more predictable factors will become more dominant.