Over the past week, I have spent a lot of time thinking about the four-year cycle of Bitcoin. Specifically, I've been wondering whether the recent shift in Washington's attitude towards cryptocurrencies is enough to serve as a catalyst to break the four-year cycle and extend the current crypto bull market to 2026 and beyond. This is a question I've been asked about frequently lately. Let's dive in.
What is the four-year cycle of Bitcoin?
Bitcoin has historically followed a four-year cycle, typically characterized by three consecutive years of significant gains followed by a correction.
Source: Bitwise Asset Management. Data range: December 31, 2010 to December 31, 2024.
The performance information presented in this report is for illustrative purposes only. The returns reflect the performance of Bitcoin itself, not any fund or account, and do not include any fees. Past performance is not indicative of future strategy performance. Future cryptocurrency cycles may not last four years, and the four-year cycle concept is based on historical data for illustrative purposes only, not a prediction of future outcomes. This material represents an assessment of the market environment at a specific time and is not a prediction or guarantee of future events.
Readers familiar with this memo know that I've been discussing the four-year Bitcoin cycle since mid-2022. At the time, Bitcoin was in a trough, and my view was: "Be patient."
Sure enough, Bitcoin has performed exceptionally well in 2023 and 2024. According to this model, 2025 should also be a strong year, which is my expectation. But investors naturally start to wonder if the market will see a reset in 2026.
What Drives the Four-Year Cycle?
The four-year cycle in cryptocurrencies is driven by the same forces that drive macroeconomic growth and recession cycles.
The cycle begins with some catalyst - typically a technological breakthrough or major event that sparks investor interest and draws new capital into the market. For example, in 2011, the first companies (like Coinbase, Mt. Gox, etc.) that allowed individuals to easily buy Bitcoin emerged, making it accessible to retail investors. Before that, buying Bitcoin required technical computer skills. Unsurprisingly, Bitcoin prices then surged.
Once a bull market starts, it builds its own momentum. Price appreciation attracts attention, and more money flows in. As the bull market accelerates, investors become greedy, and leverage levels rise. At this point, the market may see fraudulent behavior, or traditional financial infrastructure may collapse under the strain of demand. Inevitably, something breaks. For example, the key event in 2014 was the collapse of Mt. Gox, then the largest Bitcoin custodian, while the turning point in 2018 was the SEC's crackdown on initial coin offerings (ICOs).
Market corrections are often painful, with deleveraging leading to panic and despair. But eventually, new breakthroughs emerge to restart the cycle.
It's important to note that this cycle is not unique to cryptocurrencies. Many have tried to link it to Bitcoin's four-year "halving" events, but in reality, the timing of the halvings does not perfectly align with the market cycles, such as the halvings in 2016, 2020, and 2024, which did not precisely match the market trends.
At its core, this is a variant of the traditional economic cycle, just amplified by the high volatility of the crypto markets.
The Current Cycle
The current market cycle began after the widespread deleveraging that followed a series of major scandals and institutional failures in 2022, including the collapses of FTX, Three Arrows Capital, Genesis, BlockFi, Celsius, and others.
At Bitwise, we're calling this the "Mainstream Cycle", characterized by the large-scale entry of mainstream investors into the crypto markets.
The catalyst for this cycle emerged on March 10, 2023, when Grayscale won a critical first-round debate in its lawsuit against the SEC over the regulator's rejection of a spot Bitcoin ETF. Grayscale sued the SEC, arguing that its rejection of the spot Bitcoin ETF application was "arbitrary and capricious", and asked the court to force the SEC to reconsider.
Grayscale's victory was momentous. While the final ruling won't be announced for several months, from that moment on, the launch of a Bitcoin ETF became virtually a foregone conclusion, and the introduction of this product would bring cryptocurrencies into the mainstream. Indeed, the ETF launched in January 2024 and set records for inflows.
When Grayscale filed its legal arguments, the trading price of Bitcoin was $22,218; today, it has risen to $102,674. The era of crypto mainstream adoption has arrived.
Washington's Policy Shift: Potential to Break the Four-Year Cycle
According to the traditional four-year cycle, 2025 should be another banner year for the crypto markets. I agree with this - we've previously publicly predicted that Bitcoin prices will more than double to over $200,000 this year, driven by ETF inflows and a wave of corporate and government Bitcoin purchases. In fact, that forecast may now be too conservative.
However, I'm starting to see some early signs of overheating in the market:
- Many companies are raising funds or borrowing to buy Bitcoin, indicating rising risk appetites among market participants.
- There's a proliferation of Bitcoin lending projects, which allow large holders to unlock liquidity without selling Bitcoin. This isn't inherently problematic, but it's essentially a leveraged tool.
- The growth of derivative contracts, leveraged ETFs, and other trading instruments also suggests the market is heating up.
If these were the only signals, I'd still think the four-year cycle remains intact.
But then, the U.S. government issued an executive order, and everything changed.
Last week, President Trump signed an executive order (EO) that is extremely bullish for the crypto industry, making me start to wonder if the four-year cycle might be broken.
The executive order designates the growth of crypto assets as a "national priority", and lays out a regulatory framework for the U.S. crypto industry, even mentioning the establishment of a "national cryptocurrency reserve". Additionally, the current SEC leadership has taken a more crypto-friendly stance, paving the way for the largest Wall Street banks and institutional investors to dive in.**
The launch of ETFs alone is enough to attract trillions of dollars in new capital into the crypto markets, fueling the current bull cycle. But the crypto mainstream adoption vision outlined in Trump's executive order -
- Banks incorporating crypto assets into their custody services, on par with traditional assets
- Stablecoins being widely integrated into the global payments system
- The largest financial institutions formally establishing crypto investment positions
- would bring in hundreds of billions, if not trillions, of dollars in incremental funding, not just tens of billions.
Conclusion & Outlook
The question I'm now pondering is whether the positive impacts of Trump's executive order (EO) and the policy shift in Washington will manifest over the next few years, rather than just the next few months. Even if everything goes smoothly, it will take at least a year to develop and implement a new crypto regulatory framework, and Wall Street's financial giants will likely take even longer to fully adapt to and position themselves in the crypto markets.
If these impacts don't really kick in until next year, will there still be a traditional "Crypto Winter" in 2026? Will investors hibernate, even as they see the crypto industry entering a whole new era? If BlackRock CEO Larry Fink's prediction of Bitcoin reaching $700,000 comes true, will we really see a 70% deep correction?
In my view, we have not yet completely escaped the four-year cycle. As the bull market progresses, leverage in the market will continue to accumulate, and bubbles and excessive speculation are inevitable, and even the possibility of bad actors may arise. When market sentiment becomes overly inflated and prices far exceed reasonable levels, a violent correction is likely to occur.
But I expect that the magnitude of this correction will be smaller and the duration shorter than in the past.
Why?
- The cryptocurrency market has matured, with a more diverse investor structure, no longer relying solely on the speculative enthusiasm of retail investors.
- The deep involvement of institutional capital has made the market more stable, and the proportion of value investors has also been rising.
I expect the market will still see significant volatility, but the cryptocurrency market in 2026 is unlikely to experience another thorough "Crypto Winter".
As for the present, it's full speed ahead.
The cryptocurrency train has already departed, the next stop - an unknown but exciting future.
