- An advisor at Bitwise believes the Bitcoin trend has shifted from a four-year to a two-year cycle as institutional players have begun to dominate market dynamics.
In an analysis mirroring the views of Bitwise CEO Hunter Horsley and DLT Austria CEO Ed Prinz, Bitwise advisor Jeff Park said Bitcoin’s (BTC) four-year market cycle is over. Instead, it has been replaced by a two-year cycle.
Bitcoin’s Four-Year Cycle
In his latest blog post, Park explained that the Bitcoin halving event and retail market psychology drove the four-year cycle. The halving usually introduced a supply shock by cutting block mining rewards by half. In turn, this reduced selling pressure, leading traders and investors to reposition their portfolios amid the structural supply squeeze.
Rising prices follow as the situation gains media virality and fear of missing out (FOMO). However, demand eventually peaks, and BTC prices enter a deep correction as people lock in profits.
Park claimed that the cycle worked because it was a mix of a preprogrammed supply shock and the reactive herd behavior it typically catalyzed. However, current market conditions have deviated from the “old Bitcoin.” He pointed out that the supply part of the equation has become “less potent than ever.”
The New Two-Year Cycle
Bitcoin’s new dynamics are now heavily influenced by the entry of institutional players in its ecosystem. This streamlines its cycle into a two-year trend steered by fund manager economics and behavioral psychology dictated by ETF (exchange-traded fund) footprints.
Park’s assumption is based on the one- to two-year cycles most asset management investment committees (ICs) follow. The key driver of the two-year cycle lies in the annual, calendar-based performance review and the corresponding need for fund managers to crystallize their carry and maximize annual performance. This way, they could ensure their compensation and justify their existence.
Additionally, the shorter cycle allows managers to protect their reputation and justify their risk management as a premium service. It departs from mere reliance on halving supply shocks to a performance-driven model focusing on the two essential factors that determine flows: common holder risk and year-to-date profit and loss (YTD P&L).
Park highlighted that the transition to new market dynamics may also explain why OG Bitcoin whales have been gradually selling their holdings. He considers it as an external factor in the two-year cycle, but noted that it has become the source of new liquidity in the market amid the tighter mining reward schedule.
Final Thoughts
Wrapping things up, Park emphasized that the Bitcoin market trend has shifted from a preprogrammed mechanical cycle to a more dynamic, behavioral cycle dominated by professional managers via ETFs. He warned that the new two-year cycle will have greater volatility but with shorter periods of price spikes and sharp corrections as the market responds to institutional liquidity and flow-driven profit-taking beyond the usual miner supply shocks.
