Bitcoin halving no longer works? Retail investors despair as institutions buy aggressively, the ten-year war has just begun

Bitwise Chief Investment Officer Matt Hougan’s latest report states that the four-year cycle driven by Bitcoin halving has become invalid. The three major drivers—Bitcoin halving, interest rate fluctuations, and surges—have significantly weakened in influence or are reversing. Since the approval of the Bitcoin spot ETF in January 2024, the market has entered a “decade-long endurance battle,” with retail investors fixated on short-term volatility and falling into despair, while institutions forecast stablecoins surpassing $3 trillion by 2030.

Why Is the Impact of Bitcoin Halving Rapidly Diminishing?

Bitcoin halving was once the core driver of the four-year cycle. The Bitcoin blockchain’s mining rewards are halved every four years, and the slowdown in supply growth theoretically should push prices higher. This logic proved effective in early cycles: after the 2012 halving, Bitcoin surged 5530% in 2013; after the 2016 halving, it rose 1349% in 2017; and following the 2020 halving, it increased 57% in 2021.

However, a closer look reveals a critical issue: the gains after each halving are declining exponentially. From 5530% to 1349% to 57%, the decline is astonishing. The reason is simple: when Bitcoin’s market cap was only a few billion dollars, reducing supply had a huge marginal impact on price; but once the market cap exceeds $2 trillion, the supply change from halving is diluted by the massive existing market.

The latest halving in April 2024 exemplifies this. The mining reward per block dropped from 6.25 BTC to 3.125 BTC, but this has had minimal actual impact on market supply and demand. The reason is that daily trading volume has reached hundreds of billions of dollars, and the newly mined Bitcoin is a drop in the ocean compared to secondary market trading volume. Institutional investors buying Bitcoin daily via ETFs often purchase amounts far exceeding the total daily production of miners worldwide. The decisive influence of halving on prices has become a thing of the past.

More importantly, the approval of the Bitcoin spot ETF in January 2024 has completely changed the game. ETFs provide institutional investors with a compliant and convenient investment channel, with capital inflows far surpassing any previous period. When hundreds of millions or even billions of dollars flow into the market weekly through ETFs, the supply reduction from halving is no longer the main issue. Therefore, using Bitcoin halving as the core basis for predicting market cycles is no longer valid in 2026.

Interest Rate Cycles and Market Frenzy Both Reverse

The second major driver of the four-year cycle is interest rate fluctuations. The two interest rate hikes in 2018 and 2022 triggered market corrections in the crypto space. When the Federal Reserve aggressively raises rates, risk assets come under pressure, with highly volatile cryptos bearing the brunt. This logic has been repeatedly validated in the past two cycles, leading investors to reflexively associate “rate hike cycle = crypto winter.”

But the interest rate environment in 2026 is entirely different. U.S. inflation has fallen from a peak of 9% in 2022 to around 3%, and the Fed has begun a rate-cutting cycle. Lower interest rates mean reduced borrowing costs and improved liquidity, which is positive for risk assets. If rates continue to decline in 2026, this will starkly contrast with the rate-hiking environments of the past two crash years. This reverse macro backdrop undermines the logic of “failing in the fourth year.”

The third major driver is the market cycle of surges and crashes. Years of sharp declines (2014, 2018, 2022) have always been followed by strong rally years. During market frenzy, fraud and speculative bubbles proliferate, and their bursts—such as the 2018 crackdown on ICOs and the 2022 collapse of FTX—directly triggered market crashes.

However, 2025 did not see the kind of frenzy and surge typical of previous cycles. Although Bitcoin hit a new all-time high, the gains were moderate and rational, without retail investors rushing in, Meme coins skyrocketing, or leverage surging—classic bubble features. This “slow bull” pattern indicates that the market has not yet accumulated enough bubbles to burst, lacking the internal momentum for a sharp crash.

The State of the Three Major Drivers of the Four-Year Cycle in 2026

Bitcoin halving: influence has declined from 5530% to 57%, ETF capital flows dominate market supply and demand, halving is no longer the main variable

Interest rate environment: shifting from rate hikes to rate cuts, macro environment turns from negative to positive, reversing historical logic

Market frenzy: 2025’s gains are moderate and rational, bubbles have not yet accumulated, lacking internal conditions for a crash

The Long-Term Battle: Positive and Negative Forces

The so-called long-term battle involves two forces: a strong, persistent, and gradually advancing positive driver, countered by intermittent, intense but short-lived negative shocks. The positive drivers include institutional investors accelerating their deployment, ongoing regulatory improvements, concerns over fiat currency devaluation, and real-world applications like stablecoins and asset tokenization.

These trends aim to revolutionize traditional systems such as capital markets, global payment networks, and the international monetary system, and will take more than a decade to fully materialize. Early signs are evident everywhere: billions of dollars flowing into Bitcoin ETFs, steadily advancing crypto-related legislation in Congress, and rapid expansion of stablecoins and tokenized markets.

Negative shocks include macroeconomic impacts, margin calls on leveraged positions, and malicious events like hacking, scams, and exit scams. The market crash on October 10, 2025, is a typical example: a macro shock triggered a large-scale liquidation of leveraged crypto positions. The impact cycle of such negative shocks usually lasts weeks or months, with rapid onset but limited duration.

Retail investors fall into deep despair, while many institutional investors remain optimistic. The root of this divergence lies in their different time horizons. Retailers focus on the aftermath of the October liquidation, while institutions look forward to 2030, when stablecoin assets are expected to surpass $3 trillion. Both perspectives are valid, just based on different time scales.