Market Watch
Why the 4-Year Crypto Cycle No Longer Applies and the Strongest Phase May Still Be Ahead
For more than a decade, investors have relied on the 4-year crypto cycle as a dependable roadmap. Each halving constrained Bitcoin’s supply, coinciding almost magically with Federal Reserve easing cycles. Liquidity expanded, global risk appetite strengthened, and digital assets surged in powerful, synchronized bull markets.
But the 2022–2025 period broke this rhythm in a way no prior cycle ever had. High and persistent inflation forced the Federal Reserve into the sharpest tightening campaign since the 1980s. The European Central Bank pivoted far earlier, creating a rare divergence in global monetary conditions. Meanwhile, an AI-driven surge in megacap U.S. tech firms distorted headline economic strength, masking underlying softness and delaying the moment the Fed could safely begin easing.
The result was not the end of the cycle, but something more subtle and far more important: the traditional timing mechanism shifted, pushing the liquidity window - and the cycle’s most powerful phase - forward in time rather than eliminating it.
Today, as liquidity indicators turn, macro alignment improves, institutional structures deepen, and technical market structure remains incomplete, the evidence increasingly suggests that the strongest part of the cycle has not passed. It is approaching.
Below, we examine the four forces behind this conclusion.
economic weakness → rate cuts → liquidity expansion → crypto bull market.
This sequence worked in 2013, 2017 and 2021. But it failed to materialize on time in 2024–2025 due to a confluence of macro forces unprecedented in the history of digital assets.
The Inflation Spiral
Inflation did not merely rise - it surged into the most violent price shock in forty years. Wage pressures, supply-chain disruptions and fiscal overhang created a structurally much hotter inflation environment that forced the Federal Reserve to react with rare aggression. The Fed delivered:
This set of conditions simply does not exist in any prior crypto cycle. This is especially true for real interest rates. When real rates are negative, liquidity tends to expand because the cost of borrowing is below inflation - this is what fueled explosive risk cycles in 2013, 2017 and 2021. During this cycle real rates turned positive and stayed positive for the longest stretch in modern crypto history. Positive real rates are restrictive - they pull liquidity out of the system. Crypto cannot produce a full bull phase under those conditions.
The Fed–ECB Divergence
By contrast, the European Central Bank pivoted much earlier. Eurozone inflation normalized faster and the ECB began easing when the Fed could not, due to stickier inflation, U.S. labour markets and stronger headline data.
This divergence fractured global liquidity conditions. Crypto cycles historically rely on Central Banks synchronized easing.
The AI-Driven Macro Distortion
The U.S. economy’s resilience during 2023–2024 was not broad-based. It was disproportionately concentrated in a handful of megacap firms whose AI CapEx cycles boosted GDP and masked weakness elsewhere.
This created a form of policy transmission failure that forced the Fed to stay tight for longer. The pivot eventually came - but too late to ignite the halving-driven cycle on schedule. This is the first great misunderstanding of this cycle.
The pivot did not fail to happen; it simply arrived outside the historical timing window.
The Rise of Institutional Vehicles
Regulated ETFs, custody solutions and on-chain infrastructure have created systematic inflow channels that did not exist in earlier cycles. These flows are:
From Narrative Cycles to Liquidity Cycles
In 2017 and 2021, halving narratives and retail enthusiasm dominated. Today, flows are increasingly tied to:
Crypto has migrated from a reflexive, retail oriented, narrative-driven, almost purely speculative asset to a liquidity-sensitive component of global multi-asset portfolios.
A More Mature, Less Emotional Market
Forced selling events during 2023–2024 revealed how deeply institutional balance sheets now shape price action. Liquidations, treasury management, and systematic hedging have replaced retail panic as dominant drivers of volatility. This evolution breaks the rigid 4-year cadence. It replaces it with a structural, macro-linked cycle far more similar to commodities, tech equities or emerging-market FX.
All these indicators are converging now. Taken together, these forces imply the strongest liquidity impulse since 2020. Historically, crypto’s most powerful rallies occur after easing begins, not before. This is why the delayed pivot matters: the cycle is not broken - it has shifted forward.
Wave 5 historically possesses distinct characteristics:
They evolve with liquidity regimes, investor composition and macro shocks.
The correct interpretation is clear:
The Fed pivoted - but too late for the traditional halving cycle.
The inflation shock delayed easing.
The AI boom distorted growth.
Institutional flows changed the structure of demand.
Global liquidity failed to synchronize.
The classic timing window shifted forward.
And now, with FED rate cuts, QT ending, fiscal spending rising, funding conditions easing and SLR reform approaching, the liquidity cycle is finally aligning. When combined with a structurally transformed market and a clearly incomplete technical pattern, the evidence points to a simple, powerful conclusion:
The best part of the cycle is not behind us - it is directly ahead.
**Not cancelled – delayed.
Not weaker - potentially stronger.
Not synchronous with the halving - synchronous with liquidity.
In other words:
The 4-year crypto cycle didn’t die. It evolved.
And the strongest phase may be about to begin.
But the 2022–2025 period broke this rhythm in a way no prior cycle ever had. High and persistent inflation forced the Federal Reserve into the sharpest tightening campaign since the 1980s. The European Central Bank pivoted far earlier, creating a rare divergence in global monetary conditions. Meanwhile, an AI-driven surge in megacap U.S. tech firms distorted headline economic strength, masking underlying softness and delaying the moment the Fed could safely begin easing.
The result was not the end of the cycle, but something more subtle and far more important: the traditional timing mechanism shifted, pushing the liquidity window - and the cycle’s most powerful phase - forward in time rather than eliminating it.
Today, as liquidity indicators turn, macro alignment improves, institutional structures deepen, and technical market structure remains incomplete, the evidence increasingly suggests that the strongest part of the cycle has not passed. It is approaching.
Below, we examine the four forces behind this conclusion.
The Inflation Shock and Delayed Fed Cuts Broke the Historic Rhythm
The foundation of the 4-year cycle has always been the same:economic weakness → rate cuts → liquidity expansion → crypto bull market.
This sequence worked in 2013, 2017 and 2021. But it failed to materialize on time in 2024–2025 due to a confluence of macro forces unprecedented in the history of digital assets.
The Inflation Spiral
Inflation did not merely rise - it surged into the most violent price shock in forty years. Wage pressures, supply-chain disruptions and fiscal overhang created a structurally much hotter inflation environment that forced the Federal Reserve to react with rare aggression. The Fed delivered:
- the fastest rate-hiking campaign since Paul Volcker;
- deeply restrictive policy for an extended period;
- real policy rates that remained positive throughout 2023–2024;
- a balance sheet contraction (QT) continuing deep into 2025.
This set of conditions simply does not exist in any prior crypto cycle. This is especially true for real interest rates. When real rates are negative, liquidity tends to expand because the cost of borrowing is below inflation - this is what fueled explosive risk cycles in 2013, 2017 and 2021. During this cycle real rates turned positive and stayed positive for the longest stretch in modern crypto history. Positive real rates are restrictive - they pull liquidity out of the system. Crypto cannot produce a full bull phase under those conditions.
The Fed–ECB Divergence
By contrast, the European Central Bank pivoted much earlier. Eurozone inflation normalized faster and the ECB began easing when the Fed could not, due to stickier inflation, U.S. labour markets and stronger headline data.
This divergence fractured global liquidity conditions. Crypto cycles historically rely on Central Banks synchronized easing.
The AI-Driven Macro Distortion
The U.S. economy’s resilience during 2023–2024 was not broad-based. It was disproportionately concentrated in a handful of megacap firms whose AI CapEx cycles boosted GDP and masked weakness elsewhere.
This created a form of policy transmission failure that forced the Fed to stay tight for longer. The pivot eventually came - but too late to ignite the halving-driven cycle on schedule. This is the first great misunderstanding of this cycle.
The pivot did not fail to happen; it simply arrived outside the historical timing window.
A New Market Structure: Institutional Liquidity, Not Retail Cycles
The second major shift is structural. The market is no longer driven primarily by retail sentiment or halving reflex arcs. The investor base changed. Digital assets are now integrated into the broader liquidity ecosystem through ETF’s, global adoption, new regulation, etc. Several structural forces underpin this transformation:The Rise of Institutional Vehicles
Regulated ETFs, custody solutions and on-chain infrastructure have created systematic inflow channels that did not exist in earlier cycles. These flows are:
- slower;
- more persistent;
- less volatile (hence Bitcoin subdued volatility in 2025);
- and more sensitive to real yields, funding costs and liquidity conditions.
From Narrative Cycles to Liquidity Cycles
In 2017 and 2021, halving narratives and retail enthusiasm dominated. Today, flows are increasingly tied to:
- macro liquidity
- cross-asset risk premiums
- regulatory clarity
- real cost of capital
Crypto has migrated from a reflexive, retail oriented, narrative-driven, almost purely speculative asset to a liquidity-sensitive component of global multi-asset portfolios.
A More Mature, Less Emotional Market
Forced selling events during 2023–2024 revealed how deeply institutional balance sheets now shape price action. Liquidations, treasury management, and systematic hedging have replaced retail panic as dominant drivers of volatility. This evolution breaks the rigid 4-year cadence. It replaces it with a structural, macro-linked cycle far more similar to commodities, tech equities or emerging-market FX.
The Liquidity Cycle Has Not Turned - But the Turn Now Appears Imminent
The most compelling argument for why the strongest part of the cycle lies ahead is the state of global liquidity. Despite the Fed pivot, overall liquidity conditions have not meaningfully eased yet - which explains why the market has not entered a sustained bull phase, let alone an euphoric rise. But the forward-looking indicators tell a very different story:- FED Quantitative Tightening ends in December, marking the end of net liquidity withdrawal.
- Treasury General Account spending is resuming, adding reserves to the banking system.
- Year-end funding support via the SRF and term operations should prevent dislocations.
- SLR reform in early 2026 would allow banks to expand balance sheets and absorb more Treasury issuance - a structural easing catalyst.
- Fiscal expansion ahead of the U.S. mid-terms, with stimulus payments and the “Big Beautiful Bill” expected to add further fuel to the economy.
- China’s balance-sheet expansion and Europe’s fiscal easing support global liquidity synchronization.
All these indicators are converging now. Taken together, these forces imply the strongest liquidity impulse since 2020. Historically, crypto’s most powerful rallies occur after easing begins, not before. This is why the delayed pivot matters: the cycle is not broken - it has shifted forward.
The Bull Market Trend Technical Structure Is Incomplete: A Missing Wave 5
Technical analysis reinforces this thesis. Elliott Wave theory, which maps the psychology of crowd behavior, identifies a five-wave impulse as the foundation of trending markets. The final wave - Wave 5 - is often the most explosive, driven by late-cycle liquidity, broad participation and renewed retail inflows. The current long-term structure of the digital-asset market fits the pattern of an incomplete impulse.Wave 5 historically possesses distinct characteristics:
- it typically forms when liquidity inflects
- it often accelerates faster than Wave 3
- it compresses time but expands magnitude
- it ends in overextension, not hesitation
- it represents the moment fundamentals meet liquidity
Conclusion: The Cycle Didn’t Fail — It Shifted
A final consideration strengthens the bullish case even further: Current extreme bearishness among market participants is not a reason to be cautious - it is a reason to be bullish. Positioning remains light, conviction is low, retail participation is subdued, and many investors are still under-allocated. The belief that the 4-year cycle has “failed” stems from the assumption that historical timing is deterministic. But markets are adaptive.They evolve with liquidity regimes, investor composition and macro shocks.
The correct interpretation is clear:
The Fed pivoted - but too late for the traditional halving cycle.
The inflation shock delayed easing.
The AI boom distorted growth.
Institutional flows changed the structure of demand.
Global liquidity failed to synchronize.
The classic timing window shifted forward.
And now, with FED rate cuts, QT ending, fiscal spending rising, funding conditions easing and SLR reform approaching, the liquidity cycle is finally aligning. When combined with a structurally transformed market and a clearly incomplete technical pattern, the evidence points to a simple, powerful conclusion:
The best part of the cycle is not behind us - it is directly ahead.
**Not cancelled – delayed.
Not weaker - potentially stronger.
Not synchronous with the halving - synchronous with liquidity.
In other words:
The 4-year crypto cycle didn’t die. It evolved.
And the strongest phase may be about to begin.
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Duarte Caldas
Investments Principal
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With more than 20 years of experience in financial markets, Duarte specialized in the energy area in the last decade, where he had the opportunity to work with the main European Power and Gas institutions at CIMD Group. Previously, he worked as Market Strategist at IG Markets Iberia.
