Bitcoin’s Market Cycle: Are We in a Right- or Left-Translated Cycle?

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Bitcoin is at a crucial post-halving inflection point. Prices have surged past previous highs but now face macroeconomic uncertainty. The big question: 👉 Are we in a right-translated cycle with more upside ahead, or has Bitcoin already peaked, signaling a prolonged bear market? This post is based on a discussion paper I've published a few days ago (Full read / PDF) exploring six key macroeconomic and market indicators shaping Bitcoin’s current cycle and what they mean for future price appreciation. Recap on Bitcoin’s Market CyclesBitcoin follows a four-year cycle, historically peaking 12-18 months post-halving. But this cycle is different – Bitcoin hit an all-time high BEFORE the halving for the first time ever. The current cycle (measured from the last bottom) began in early November 2022. Four-Year Bitcoin Market Cycles I assume two market cycle scenarios:
🔥 So, which one are we in?In the following let's take a look on key indicators driving Bitcoin's market cycle and examine their current trends, outlooks, and potential macroeconomic implications. 1. M2 Global Supply (Liquidity)
M2 Global Supply (taken from 21 central banks) 2. Core PCE Inflation (Fed’s Key Inflation Measure)
3. Unemployment Rate
4. Fed Funds Rate
5. NASDAQ Composite (Stock Market Correlation)
Lastly, I examined ETF Net Flows, which have been crucial this cycle and closely correlate with price action. 6. ETF Net Flows (Institutional Demand)
Let's discuss the scenarios:Scenario 1: Left-Translated Cycle Scenario With Bitcoin reflecting risk-off sentiment since February 2025, the likelihood of a left-translated cycle has become increasingly relevant. In contrast to previous post-halving cycles, where Bitcoin’s peak typically occurred 12–18 months after the halving, this scenario suggests that Bitcoin may have already reached its cycle high on January 20, 2025. By continuously delaying further rate cuts, the Fed keeps liquidity tight and weakening stock markets drag Bitcoin lower. This means, the market is about to enter a prolonged bear phase lasting up to 1.5 years, if aligning with the time frames observed in the last two cycles. Supporting arguments for Scenario 1:
Validity of Scenario 1: The early peak in ETF-driven demand has reduced the likelihood of a sustained post-halving rally, including a blow-off phase. Net inflows from Bitcoin ETFs turned negative in Q1 2025, indicating that institutional investors are already taking profits rather than accumulating, limiting further upside potential. In past cycles, the post-halving supply shock was a key driver of price appreciation. However, this cycle deviates from historical norms as Bitcoin peaked pre-halving, suggesting that demand was pulled forward and exhausted earlier than expected. While the U.S. economy has avoided recession longer than anticipated, recession risks remain. A risk-off environment can further dampen institutional demand for Bitcoin, reinforcing downward price pressure. Additionally, the Fed’s cautious stance has restrained speculative sentiment, preventing the retail-driven euphoria that typically characterizes late-cycle market behavior. Meanwhile, M2 Global liquidity growth has slowed, and elevated borrowing costs are constraining new debt issuance, limiting the flow of fresh capital into risk assets. If the stock market enters a prolonged correction, Bitcoin is unlikely to decouple and may face continued selling pressure. Historical left-translated market cycles, such as the 2000 dot-com crash and the 2007 financial crisis, saw tech stocks peaking early, only to decline sharply. Bitcoin, strongly correlated with equities and representing a liquidity- sensitive asset, follows a similar trajectory. Scenario 2: Right-Translated Cycle Scenario The recent 30% decline in Bitcoin’s price remains within the bounds of a typical market correction, given the asset’s historically high volatility in an open and liquid market (comparable to April–May 2021). This does not necessarily indicate a deviation from the expected right-translated cycle structure. Based on the last two cycles, Bitcoin is projected to reach its cycle peak approximately 1,050 days after the previous market bottom, placing the expected peak in early Q4 2025. In the mid-term, supportive economic policies from the current U.S. administration, along with expected monetary easing from the Fed in early H2 2025, provide the foundation for renewed market growth. Supporting arguments for Scenario 2:
Validity of Scenario 2: Historically, the right-translated cycle has been the base case in previous Bitcoin market cycles, following a typical 12–18 month post-halving rally. The current downturn in Q1 2025 appears to be seasonal rather than cyclical, largely influenced by post-election year market weakness, which has historically resolved with a recovery in the second half of the year. Macroeconomic indicators suggest that the risk of a severe recession remains lower than feared, reducing the likelihood of further liquidity tightening. The labor market re- mains stable, with unemployment rates not surging, allowing for continued economic expansion. Additionally, inflation is steadily declining toward the Fed’s 2% target, strengthening expectations for rate cuts in H2 2025. If the Fed follows through on this, looser financial conditions will result in M2 expansion, improving overall market liquidity and risk-on sentiment. ETF net outflows have been gradually declining, indicating that selling pressure is easing. A shift from net outflows to net inflows will signal a renewed phase of institutional demand, which reinforces the right-translated scenario. If these factors align positively, Bitcoin will follow historical cycle timing, with a potential cycle peak in early Q4 2025. CONCLUSION Both a right- and left-translated cycle scenario can be supported by strong arguments, reflecting the market’s current state of macroeconomic uncertainty. Core macro indicators have yet to establish sustained long-term trends, which may be attributed to the new U.S. administration’s mixed and partly contradictory policies. However, such uncertainty is not uncommon in early post-election years. Ultimately, the key determining factor will be the trajectory of monetary policy leading into summer 2025, particularly whether M2 Global expands, as historical data suggests a strong correlation between its growth and Bitcoin price developments. So far, the Fed has refrained from reintroducing rate hikes, primarily due to stabilizing unemployment rates. Additionally, declining inflation supports the case for further rate cuts. If this trend continues and unemployment remains stable or declines, the probability of monetary easing increases, strengthening the foundation for a right-translated cycle with renewed, growing demand. However, the long-term economic implications of the administration’s policies, particularly its re-industrialization agenda and reshoring efforts, must be closely monitored. Recent layoffs and potential increases in the unemployment rate can negatively impact sentiment, reducing the probability of expansionary fiscal policies. Additionally, the introduction of new tariffs introduces further uncertainty. While tariffs may temporarily boost domestic employment, the higher import costs can drive inflation higher, potentially delaying Fed rate cuts and tightening liquidity conditions. From mid-April 2025, with fresh labor market and inflation data available, along with another Fed testimony, the probabilities of a left- versus right-translated cycle will become clearer. TL;DR: Bitcoin’s cycle hinges on macro conditions & liquidity. A Right-Translated Cycle means more upside into 2025-2026, while a Left-Translated Cycle suggests Bitcoin already peaked in Q1 2025. Declining inflation and stable or falling unemployment increase the likelihood of rate cuts, reinforcing a right-translated cycle with renewed demand. Read the full discussion paper here or download PDF from here. Critical Reflection: My approach heavily emphasizes macro indicators, as I view liquidity and monetary policy as the primary market drivers. I also focus on the two scenarios I find most likely, though I acknowledge the market could evolve differently. Factors like diminishing returns might even mean that traditional cycle patterns no longer hold. submitted by /u/nerdben |