Reconsidering the Bitcoin Halving Effect: New Market Logic Under Multiple Clocks

Authored by: Andjela Radmilac

Translated by: Luffy, Foresight News

The four-year cycle of Bitcoin has long been a reassurance for crypto market participants. Even those claiming not to believe in this pattern tend to follow it in their actual trading operations.

Approximately every four years, new Bitcoin supply is halved. The market remains relatively calm for several months, then liquidity begins to flood in, leveraged funds follow suit, retail investors regain access to their wallets, and Bitcoin’s price chart embarks on a new journey toward hitting all-time highs.

Asset management firm 21Shares uses straightforward data to outline this familiar script: In 2012, Bitcoin rose from about $12 to $1,150, then retraced 85%; in 2016, from around $650 to $20,000, then plummeted 80%; in 2020, from approximately $8,700 to $69,000, then fell back 75%.

Therefore, when by the end of 2025 the argument that “the cycle is dead” becomes loud, the market’s reaction is driven by the fact that this voice is not only from retail crypto investors but is also widely propagated by institutions: Bitwise suggests 2026 may break the traditional cycle pattern; Grayscale openly states that the crypto market has entered a new institutional era; and 21Shares explicitly questions whether the four-year cycle still holds validity.

From these heated debates, we can distill a core fact: Bitcoin halving remains an established reality and will continue to be a significant force in the market, but it is no longer the sole factor determining Bitcoin’s price movement.

This does not mean the end of the cycle; rather, today’s market has many “clocks,” each ticking at different speeds.

Old cycles were once “lazy calendars,” but now they have become cognitive traps

Bitcoin halving cycles have never held any magical power; their effectiveness is simply because they condense three core logics into a clear time point: reduced new supply, a market narrative anchored around this event, and a common focus for investor positioning. This “calendar” solves the market’s coordination problem for capital.

Investors don’t need to deeply study liquidity models, the mechanics of cross-asset financial systems, or identify the exact identity of marginal buyers—just point to this four-yearly key event and say: “Patience is all you need.”

But this is also why old cycles have become cognitive traps. The clearer the script, the easier it is to develop a single-minded trading mindset: pre-positioning for halving rallies, waiting for price surges, selling at the top, and bottom-fishing in bear markets. When this operational pattern no longer reliably yields clear and substantial returns, market reactions tend to become extreme: either firmly believing that the cycle still dominates everything, or convinced that the cycle has already vanished.

Both viewpoints seem to overlook the real structural changes in the Bitcoin market.

Today, Bitcoin investors are more diverse, and their channels for investment are closer to traditional financial markets. The core venues for price discovery are increasingly aligned with mainstream risk assets. The interpretation by State Street on institutional demand confirms this: Bitcoin exchange-traded products (ETPs) are now compliant with regulations, and this “familiar financial instrument” effect is influencing the market, with Bitcoin still being the largest market cap asset within the crypto space.

Once the driving forces behind the market change, its rhythm will also adjust. This is not because the halving’s effect has failed, but because it now needs to compete with other forces that, for a long time, may overshadow halving’s influence.

Policy and ETFs as new rhythm controllers

To understand why the old cycle is now largely irrelevant, we need to start from the part of the story least related to “crypto”: the cost of capital.

On December 10, 2025, the Federal Reserve will cut the federal funds rate target range by 25 basis points to 3.50%-3.75%. Weeks later, Reuters reports that Fed Governor Stephen M. Mullan advocates for more aggressive rate cuts in 2026, including considering a full-year reduction of 150 basis points. Meanwhile, the People’s Bank of China also states that in 2026, it will maintain reasonable liquidity through reserve ratio cuts, interest rate reductions, and other measures.

This means that when the global financing environment tightens or loosens, the group of buyers willing and able to hold high-volatility assets will also change, setting the tone for all asset price movements.

Adding the impact of spot Bitcoin ETFs, the narrative of a four-year cycle becomes even more one-sided.

Spot ETFs undoubtedly bring new buyers into the market, but more importantly, they change the demand structure. Under the ETF product structure, buying power manifests through the creation of fund shares, while selling pressure appears as redemptions of fund shares.

The factors driving these capital flows may be entirely unrelated to the halving: portfolio rebalancing, risk budget adjustments, cross-asset price declines, tax considerations, the approval process of financial platforms, and slow distribution channels.

The importance of this last point exceeds many people’s expectations. US banks announced that starting January 5, 2026, they will expand the authority of financial advisors to recommend cryptocurrency ETP products. This seemingly routine regulatory adjustment actually broadens the scope of potential buyers, alters investment methods, and imposes new compliance constraints.

This also explains why the “cycle is dead” argument, even in its most forceful form, has clear limitations. It does not deny the impact of halving but emphasizes that it can no longer alone determine the market’s rhythm.

Bitwise’s overall outlook for the 2026 market is based on this logic: macro policies are crucial, and investment channels are vital. When marginal buyers come from traditional finance rather than native crypto sources, market behavior will differ significantly. Similarly, 21Shares’ analysis report focusing on cycles and the “2026 Market Outlook” also expresses the view that institutional integration will become the core driver of future crypto asset trading.

Grayscale goes further, defining 2026 as the year when the crypto market deeply integrates with the structure and regulation of the US financial system. In other words, today’s crypto market is more tightly woven into the daily operations of traditional finance.

If we are to redefine Bitcoin’s cycle pattern, the simplest way is to see it as a set of “regulation indicators” that change weekly.

The first indicator is policy trajectory: not only the interest rate movements but also the tightening or loosening of the financial environment margins, and whether the related market narratives are accelerating or decelerating.

The second indicator is ETF capital flow mechanisms: because the creation and redemption of fund shares directly reflect the real inflows and outflows of demand through this mainstream new channel.

The third indicator is distribution channels: which entities are permitted to buy in large quantities, and under what constraints. When large financial channels, broker platforms, or model portfolios lower their entry barriers, the buyer base expands slowly and mechanically, with a much greater impact than a single day of market frenzy; conversely, when access is restricted, capital inflow channels also narrow accordingly.

Additionally, two internal market indicators are used: one is volatility characteristics—whether prices are driven by stable two-way trading or dominated by market pressure, often accompanied by rapid sell-offs and liquidity droughts, usually triggered by forced deleveraging.

The other is the health of market positions—whether leveraged funds are being patiently accumulated or over-concentrated, increasing market fragility. Sometimes, spot prices seem stable, but underlying positions are overly crowded, hiding risks; other times, prices appear chaotic, but leverage is quietly resetting, gradually releasing market risks.

Overall, these indicators do not negate the effect of halving but place it within a more appropriate structural context. The timing and form of Bitcoin’s major trend movements are increasingly determined by liquidity, capital flow systems, and risk concentration in a single direction.

Derivatives turn cycle peaks into risk transfer markets

The third clock is often overlooked by most cycle theories because it is harder to explain: derivatives.

In the past, retail-led “sharp rise - sharp fall” patterns, leverage played the role of an out-of-control party at the end.

In markets with higher institutional participation, derivatives are no longer secondary investment options but the core channels for risk transfer. This changes the timing and manner of market stress manifestation and resolution.

On-chain analysis firm Glassnode’s January 2026 “On-Chain Weekly Report” notes that the crypto market has completed year-end position resets, profit-taking behaviors have eased, and key cost basis levels have become important indicators for confirming whether the market can sustain healthy upward movement.

This sharply contrasts with the market atmosphere during traditional cycle peaks, when traders often scramble to find reasons for vertical price surges.

Certainly, derivatives do not eliminate market frenzy, but they greatly alter how such frenzy begins, develops, and ends.

Options tools allow large holders to express views while locking in downside risks, and futures can hedge against spot selling pressure. Although liquidation cascades still occur, they may happen earlier, completing position clearing before the final market top. Ultimately, Bitcoin’s price may cycle through “risk release - rapid rise” patterns repeatedly.

Because of this, public disagreements among large financial institutions become valuable rather than confusing.

On one hand, Bitwise proposed in late 2025 to “break the four-year cycle pattern”; on the other, Fidelity believes that even if 2026 might be a “rest year,” the Bitcoin cycle pattern has not been broken.

This disagreement does not mean one side is correct and the other is foolish. What is certain is that the old cycle is no longer the only valid analysis model, and the reason for the reasonable divergence among different frameworks is that market influences are becoming more complex, covering policy, capital flows, position structures, and market architecture.

So, what will the future of Bitcoin’s cycle look like in this more complex landscape?

We can distill it into three scenarios, each with practical trading and investment implications, even if they are too plain to become market buzzwords:

Extended cycle: halving still influences, but the peak timing will be delayed because liquidity injection and product distribution take longer to transmit through traditional financial channels.

Range-bound with gradual upward trend: Bitcoin will spend more time digesting supply shocks and position adjustments until capital flows and policy trends align, triggering a trendful rally.

Macro-driven shocks: policy adjustments and cross-asset market pressures dominate for a period, and in the face of fund redemptions and deleveraging, the impact of halving becomes negligible.

The clearest conclusion from all this is: claiming that the four-year cycle is dead is merely a superficially clever but ultimately meaningless shortcut argument.

The more rational and only proper way to approach Bitcoin’s cycle is to accept that the market now has multiple clocks. The winners in 2026 will not be those who memorize a single timeline but those who can understand the “operational rhythm” of the market: grasping changes in capital costs, tracking ETF capital flows, and sensing the subtle accumulation and release of risks in derivatives markets.