Has Bitcoin’s 4-Year Cycle Finally Broken?

Every four years, a significant event occurs that ripples through the crypto markets. This 4-year cycle has occurred 3x in the past and is in the midst of the fourth. However, some see this trading strategy as obsolete, citing several factors that make this approach outdated. Here’s everything you need to know about Bitcoin’s (BTC +0.45%) 4-year cycle, how it has guided traders in the past, and if it remains a viable strategy to follow.

What is the 4-year Cycle in Crypto?

Bitcoin’s 4-year cycle is a term that refers to Bitcoin’s past market patterns following its halving. As the first all-digital currency, Bitcoin has had the luxury of every metric being tracked since its launch. As such, traders have managed to extrapolate data every year to form trends that follow and lead up to the events.

The Halving

The halving occurs due to the mechanics of the SHA-256 consensus algorithm. Bitcoin’s cryptographic algorithm includes a reduction in mining rewards every 210,000 blocks. As the average block time is around 10 minutes, this equates to a mining reward change every 4 years, referred to as the halving.

The goal of this structure was to account for the growing value of the coin and network. To this extent, the maneuver was successful as Bitcoin’s value has risen significantly since its launch nearly 16 years ago. Notably, the halving also represents Bitcoin’s yearly supply decreasing as the network gets closer to its total 21M total emissions.

Despite the mining rewards reducing 50% every 4 years from 50 Bitcoin originally, all the way down to their current 3.125 Bitcoin, the monetary value of the rewards is still much higher due to the coin’s current price.

What are the Phases of the 4-Year Cycle?

Thanks to the extraordinary amount of data on Bitcoin’s historic rise into global stardom, analysts have successfully broken the halving cycle into 4 distinct phases. Each phase has been recognizable in the prior halving events. They include a price build-up before, during, and shortly after the event, followed by a market correction.

1. Breakout Phase

The first stage of the 4-year cycle is the breakout phase. This stage sees traders starting to strengthen their positions in anticipation of future movements. This stage will usually begin 2-4 months before the halving event and will continue all the way to months after the rewards have been split.

2. Hype Phase

Directly following the halving, the hype phase hits the market. Traditionally, this time will see major price surges in the Bitcoin market. Bitcoiners and others who have just begun to learn about the asset will rally, celebrating another 4 years of success. Notably, the hype phase can result in all-time highs.

3. Correction Phase

Once the hype slows and those who expected to ride off a quick market movement begin to leave the market, the prices will drop. This period can last a month or even years. This sharp correction tests Bitcoiners’ “diamond hands” as the currency has seen significant value loss and remained in a bear market for years.

4. Accumulation Phase

The final phase of the 4-year cycle is the accumulation phase. This time marks the end of the bear market, as investors who were once wary of Bitcoin’s longevity begin to regain confidence in the market. During this phase, the market would stabilize and begin to see growing investor interests, which eventually renew the cycle.

Past 4-year Cycles

To date, the 4-year cycle has been a reliable method to gauge Bitcoin’s market unpredictability. Here’s a look at the past 4-year cycles and how their phases occurred:

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What Causes the 4-year Cycle?

There have been several theories as to what causes the 4-year cycle. In the past, it was believed that growing demand from traders and mining activities were the primary driving factors behind these market movements. However, a new theory recently emerged after Arthur Hayes published the “Long Live the King!” essay. In this paper, Hayes gives a compelling argument as to the root causes of the 4-year cycle and why it may no longer be applicable.

Other Factors that Could Have Fueled the Cycles?

Hayes argues that the real reason for the market contractions and expansions is monetary flow. He presents his argument concisely, illustrating how the cycles of 2014, 2018, and 2022 coincided with major economies tightening their monetary supply, leading to nearly 80% value corrections.

Hayes explains how the USD and Chinese Yuan are the real masters of the Bitcoin economy and how the torch has now been passed to institutional investors. He cites vital details, including how Bitcoin’s very first bull run occurred precisely during a Chinese credit expansion and ended when the Chinese authorities tightened the supply. He also credited the Federal Reserve’s quantitative easing strategy as being another driving factor in the first cycle.

The second cycle was driven by another Chinese credit expansion, which enabled investors to enter ICO investments, further driving the economy. In his argument, he shows how the market cooled as Chinese credit restrictions began to become more stringent.

Hayes states that the US economy and the COVID pandemic drove the 3rd halving cycle. He cites a sudden influx of USD provided by the government to people in the form of stimulus checks and loans directly as the main contributor in terms of investment capital for Bitcoin traders. He notes that as soon as the Federal Reserve began tightening its lending, Bitcoin’s momentum cooled and a bear market took hold.

Why is this 4-year Cycle Different?

Several factors make this 4-year cycle different than predecessors. For one, Bitcoin is more established than ever before. It’s been adopted by governments, institutional investors, developers, and more. It’s no longer considered a fringe investment or primarily used to conduct activities on the dark web. Today, it’s seen as a reliable and agnostic store for value and digital currency.

While it may just be a delay, several signs are pointing to a change in the traditional 4-year cycle development. For instance, 18 months have passed since the rally, yet there remains no indication of a bear market. Even technical signals like the RSI, which generally help traders see if an asset is overextended, show controlled growth.

In comparison, the RSI managed to peak at +90 in the 3 previous halving cycles. However, this cycle has not seen the RSI reach the 80s. As such, it demonstrates that the asset isn’t in a balloon at all but rather experiencing a steady growth rate, which could easily continue.

Institutional Support

The main difference between this halving and the past is the growing amount of institutional support Bitcoin receives. It’s no longer just developers and traders standing behind this asset. The world’s leading financial institutions now offer support for Bitcoin and related products like Bitcoin ETFs.

Major institutions, including BlackRock, Fidelity, and MicroStrategy, continue to invest billions into their ETFs and other digital investment vehicles. This month, the SEC also announced that it would institute general submission guidelines for blockchain-related assets, such as ETFs. This maneuver marked a major upgrade to the application-specific approach that the SEC previously required.

Notably, U.S. spot Bitcoin ETFs launched in 2024 and have since amassed tens of billions in assets—BlackRock’s IBIT is nearing $100B AUM, the fastest-growing ETF on record—underscoring a structural shift toward institutional demand. This growth represents a shift in sentiment from the world’s investment leaders. This shift is precisely what could negate the 4-year cycle moving forward.

Unlike past cycles, where miners, traders, and even monetary supply were restricting factors, the introduction of traditional investment firms changes everything. These organizations operate purely on metrics, meaning they will make long-term investments and have the financial stability to ride out any bear markets.

Additionally, institutions have preset buying cycles, which provide the market with smoother economics. Keenly, this constant buying pressure helps to stabilize price drops and intensifies demand.

Expanding Liquidity

Another factor that Hayes argues will make the 4-year cycle obsolete is the fact that major economies are expanding their liquidity rather than restricting it like in previous cycles. For example, the Federal Reserve slashed interest rates by 25 basis points in September. Notably, this is part of its larger goal to reduce it by 100 points within the next year.

Specifically, the US Federal Reserve has two more rate cuts planned for the coming months before the end of 2025. The first rate cut is expected this month, with a second cut anticipated in December. These actions will increase monetary flow, providing investors with more income to put towards Bitcoin.

Across the Pacific, China continues to curb deflation. This action will create more liquidity in their economy, which should support further price gains for the Bitcoin market. Notably, these two economies are not alone in their liquidity strategy, and other significant influencers like India, the EU, Japan, and Brazil could also impact the monetary supply.

The Math Surrounding the Halving is Different

Another factor behind the belief that the 4-year cycle may be outdated is the underlying mathematical principles governing the event. Remember, the halving signals a 50% drop in mining rewards for network nodes. Each of these actions dropped inflation within the network, creating a supply shock.

Nowadays, market prices largely determine the price movements of many goods over time. Additionally, since the rewards are much less Bitcoin than before, the miners don’t have as many extra coins to sell. Remember, early miners received 50 coins for their actions, meaning that they could sell many and still retain some holdings.

However, when rewards are only 1.5625 Bitcoin after the next halving, there will be fewer coins to sell. Consequently, there’s much less supply influx from miners who may choose to HODL their tokens rather than offload them during the market hype phase.

HODLers

Another factor that can’t be overlooked is the growing number of long-term HODLers. Few assets in history have seen such success as Bitcoin, and those who have managed to HODL the token through all the ups and downs are now sitting on significant returns. As the supply continues to dwindle, it’s becoming more popular for traders to take a HODLers approach rather than seek out quick returns.

Macro Forces Now Drive Bitcoin (Rates, Liquidity, Policy)

Another factor to consider is that Bitcoin no longer exists in a digital bubble. This asset is now part of the global economy and, as such, it is subject to the market pressures found in all assets. Market movements can now occur because of inflation, interest rates, fiat currency supply, and other macro trends.

Is Every 4-year Cycle Expected to be the Last?

Interestingly, a long-standing debate has occurred before and during every halving. Each event has those who think it will be the last time the asset follows the cycle, and those who believe it’s part of the market’s characteristics. For now, this cycle appears to be different, particularly in its late correction phase. However, it’s still too late to make a final judgment.

Final Thoughts: Is Bitcoin’s 4-Year Cycle Done?

If Hayes and others who believe outside factors drove the halving trading cycle are correct, then the market is about to venture into uncharted territory. Given that Bitcoin is more valuable and understood than ever before, there’s good reason to believe that it may have outgrown its 4-year cycle. For now, only time will tell.

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