Bitcoin ETF reshapes market cycles: 2-year new rules are more decisive than the 4-year halving

Bitcoin’s market cycle is undergoing a fundamental transformation. The four-year cycle once dominated by halving events is now a thing of the past, replaced by a new two-year cycle driven by ETF liquidity—and this change is far more profound than most people realize.

Halving is no longer the main player

In the past, Bitcoin’s price fluctuations could be explained by a relatively stable framework: halving events mechanically cut new supply, squeeze miner margins, push weak participants out, and thus alleviate selling pressure. This logic, combined with investors’ FOMO psychology, formed a predictable cycle of “early positioning → price rise → media coverage → retail FOMO → leverage frenzy → eventual crash.”

This mechanism was effective because it combined supply-side shocks with herd mentality—a seemingly reliable feedback loop.

But the problem is: the current circulating supply pressure of Bitcoin has weakened to its lowest point in history. The supply contraction effect from halving is diminishing, and the dominant forces influencing prices have quietly shifted.

Institutional asset managers are becoming the new price setters

Now, the liquidity of Bitcoin is primarily controlled by asset managers who evaluate investment returns on an annual (or two-year) cycle—especially large institutional funds entering via ETFs.

Their decision logic is completely different:

First, management fee cycle. Asset management companies settle fees annually (by December 31), which means fund managers have strong incentives to lock in gains and show performance before year-end. If volatility rises at year-end but their unrealized gains are insufficient to resist risk, they tend to sell their most sensitive positions.

Second, annual return targets. A typical fund manager might tell the investment committee that Bitcoin’s average annual growth rate is about 25%, so they need to achieve over 50% annual return to meet their benchmarks. This implies:

• Investors who gain 100% in 2024 have already exceeded their targets
• But investors entering early in 2025 with a current unrealized loss of 7% need to achieve 80% or higher returns over the next 12-24 months
• This mismatch creates time pressure

Third, liquidity directional risk. When all institutions hold the same assets, market liquidity can only flow in one direction—either all buy or all sell—amplifying potential market volatility.

The truth revealed by ETF liquidity data

Analyzing the monthly net inflow data of Bitcoin ETFs since their inception reveals an unsettling pattern:

• 2024: Most gains come from accumulated inflows throughout the year, with peak inflows in October (BTC price $70,000) and November ($96,000)
• 2025: Except for March, nearly all months show ETF outflows or losses

This means that institutional investors who bought heavily in October and November 2024 set thresholds at $91,000 and $125,000 respectively. If these prices cannot be reached within a year, they will face significant performance evaluation pressure.

Worse still, large inflows in June (corresponding to higher entry prices) will face the same decision point in June 2026. If targets are not met by then, these funds are likely to cut losses early.

Current Bitcoin price is $90.65K, very close to the equilibrium point. From a market cap perspective, a 10% decline from here could bring the entire Bitcoin ETF asset management scale back to early-year levels ($103.5 billion).

The real meaning of the “2-year dynamic cycle”

Rather than a cycle, it’s better described as a liquidity trap:

The cost basis of new capital entering the market and the profit/loss expectations of existing investors are structurally misaligned. As time passes and prices stagnate (regardless of whether you like it or not, time always moves forward), institutional investors’ annualized returns will be gradually suppressed—ultimately falling below their risk-adjusted return targets.

Once the annualized return drops below 30%, selling will begin. This isn’t driven by Bitcoin’s price going up or down, but simply because time costs have eroded relative returns.

The higher predictability of the new cycle

In a sense, this is bad news: Bitcoin is no longer driven solely by the “predictable” four-year halving cycle, but by the cost basis and time pressure of institutional funds.

But from another perspective, it’s good news: these institutional behaviors are more predictable than individual miners and retail investors’ psychology. Tracking ETF cost basis, monthly inflow scales, and investors’ profit/loss states at different periods can better forecast future pressure points than just watching halving dates.

Conclusion: supply is dead, liquidity is king

Once, Bitcoin’s volatility stemmed from mechanical supply shocks and behavioral finance resonance. Today, the importance of supply has greatly diminished—not because there are more Bitcoins, but because the buyers allocating Bitcoin have become institutionalized.

This shift means: the old narrative framework (the halving story) is no longer applicable, but new rules are forming. Those who understand this new institutional logic, track cost basis rather than just technicals, will be better positioned to seize opportunities in the new cycle.

Time is no longer Bitcoin’s ally—at least not during this critical window of 2025-2026.