The Evolution of the Bitcoin Cycle: From Halving Myths to ETF Viral Effects

The rules that have governed the Bitcoin market over the past 4 years are breaking down. As the supply constraint logic centered around the halving event loses its predictive power, new forces are taking control of the market. The old methods of attracting retail investors through viral spread have now fallen into the hands of more disciplined fund managers, and the timing of their fiscal year-end has become a new inflection point.

Past Cycles No Longer Work

Bitcoin’s 4-year cycle has been explained by a combination of mechanical supply reduction and collective psychology. With each halving, new mining supply is cut in half, causing weaker miners to exit the market, creating predictable supply shocks. This pattern has repeated: initial positioning → sharp price surge → widespread media attention → retail investors’ FOMO buying → leverage frenzy → crash.

This pattern was valid because there was a clear trigger—supply decline—and public sentiment was perfectly synchronized. But as we pass 2024, the situation has fundamentally changed. The impact of decreasing circulating supply on the market has become much less significant than before, and Bitcoin’s marginal inflation has already been reduced to very low levels.

Fund Managers’ Performance Game Creates a New Cycle

Going forward, the Bitcoin market seems to follow fund managers’ fiscal years rather than halving events. This can be called a “2-year cycle,” with the key variable being the performance evaluation system of fund managers.

In asset management, fund returns are standardized as of December 31 each year. Hedge funds, in particular, must settle their positions at year-end, making them highly sensitive to underperformance if they fail to realize sufficient gains early in the year. Their employment status—whether they stay or get fired in 2026—depends on it.

Year-to-Date (YTD) profit/loss and crowded trades are critical factors influencing fund flows. When liquidity moves in a unidirectional manner amid fears that “everyone holds the same assets,” price volatility becomes extreme. Funds tend to enter and exit simultaneously.

Academic research shows that about one-third of hedge fund returns are attributable not to management skill but to capital inflows. Initial capital inflows mechanically boost returns, which in turn induce further inflows—a positive feedback loop. This cycle typically takes about 2 years.

ETF Funds Replacing Supply Constraints

In October 2024, Bitcoin’s price was $70,000. By November 2024, it surged to $96,000. Based on these entry points, to achieve an annualized return of over 25%, the price should reach approximately $91,000 in October–November 2025 and $125,000 in the same period in 2026.

Assuming Saylor’s “20-year CAGR of 30%” is the institutional benchmark, fund managers need to justify performance exceeding this to their investment committees. The 100% rise from early 2024 to year-end was a performance ahead of expectations by about 2.6 years.

However, investors who entered in early 2025 are now at a loss, with a year-to-date return of only -12.27%. If Bitcoin remains at $89.63K (January 2026), they will face a critical decision in the first half of 2026.

Investors who entered around $107K in June 2025 (the month with the highest ETF inflows) need to reach over $140K by June 2026 to meet their target returns. Otherwise, they are likely to realize gains and move into other asset classes.

The most telling data is the monthly net cash flow from CoinMarketCap. While most of 2024’s gains were concentrated in a few months, nearly every month in 2025 (except March) saw ETF outflows. This indicates that the large inflows that occurred after price increases are now realizing profits.

The Trap of the 2-Year Cycle: Why Sideways Markets Are Deadly

An interesting point is that even if Bitcoin’s price does not decline, it can still be risky. When prices stagnate, returns tend to decline in a curve. Asset management is fundamentally about “cost of capital” and relative opportunity costs.

If Bitcoin’s annual return drops below 30%, fund managers will rotate into other assets offering higher yields. The cycle of “time passing” in a sideways market diminishes Bitcoin’s relative attractiveness, creating a vicious cycle.

For example, an investor who bought at $70K in October 2024 and now sees $89.63K after 15 months has gained about 28%, which annualizes to roughly 22%. This is below the expected benchmark of 25%, indicating insufficient performance.

This phenomenon signals a “fund flow drought” not because the 4-year cycle has ended, but because, within the new 2-year cycle mechanism, the timing of new capital inflows has never aligned with existing investors’ profit-taking points.

A New Paradigm: More Predictable but More Cold

In conclusion, the old rules of Bitcoin are over, replaced by a new set of laws. Instead of supply constraints like halving, institutional inflows and outflows via ETFs have become the dominant factors. This makes the market more predictable but also more detached and cold.

While previous cycles relied on psychological viral spread and impulsive buying, the new cycle is driven by fund managers’ fiscal years, performance benchmarks, and profit-taking plans. Only investors who understand these evaluation systems can anticipate the next inflection point.

Bitcoin’s price still fluctuates based on marginal demand and supply, as well as profit realization behaviors. The only difference now is that the buyers have changed. As the market shifts from individual miners and retail investors to professional funds, it has become more mechanical—and fortunately, this allows for more precise tracking of market changes.