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 Cycles

Bitcoin 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:

• Right-Translated Cycle (Bullish) → Extended uptrend, peak closer to 2025-2026
• Left-Translated Cycle (Bearish) → Early peak, prolonged downturn

🔥 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)

• Expanding again but slower than previous cycles
• If liquidity continues rising, it supports a right-translated cycle

M2 Global Supply (taken from 21 central banks)

2. Core PCE Inflation (Fed’s Key Inflation Measure)

• Inflation still above 2% target but declining
• Fed policy decisions and unemployment trends will determine whether inflation stabilizes or rebounds. The risk of stagflation needs to be monitored.
• If inflation remains sticky, Fed may delay rate cuts → Left-Translated Cycle

Core PCE Inflation

3. Unemployment Rate

• Stabilized at 4.1%, but risks of job losses are rising
• Current U.S. administration's layoff policies need to be monitored (we'll know more with the upcoming jobs report on April 4, 2025)
• If inflation stays high despite rising unemployment, the Fed faces a tough choice: keep rates high, risking economic distress, or cut them to boost jobs while fueling inflation. This decision will be key to 2025's macro outlook.
• If unemployment spikes, Fed may cut rates sooner → Right-Translated Cycle

Unemployment Rate

4. Fed Funds Rate

• Rates Targets were cut to 4.50% but remain high
• If rate cuts accelerate, lending stimulation and credit expansion will increase overall liquidity in the financial system → Right-Translated Cycle,
• If rates stay high → Left-Translated Cycle

Fed Funds Target Rates

5. NASDAQ Composite (Stock Market Correlation)

• Peaked in Dec 2024, currently declining
• Historically, Bitcoin’s price has exhibited a strong correlation with equities. A downturn in equity markets can lead to weakened investor confidence in speculative assets, increasing selling pressure on cryptocurrencies, particularly in a left-translated cycle.
• If stocks rebound → Bitcoin follows (bullish)
• If stocks keep dropping → Bitcoin likely enters Left-Translated Cycle

NASDAQ Composite

Lastly, I examined ETF Net Flows, which have been crucial this cycle and closely correlate with price action.

6. ETF Net Flows (Institutional Demand)

• Net inflows turned negative in Feb 2025
• The significant outflows observed since late February 2025 suggest waning institutional confidence in the market. If net flows remain negative for an extended period, this can serve as a bearish signal, indicating sustained selling pressure and potential downside risk.
• If inflows resume → Right-Translated Cycle
• If outflows continue → Left-Translated Cycle

ETF Net Flows

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:

• ETF adoption absorbed liquidity too early. The introduction of U.S. spot Bitcoin ETFs in January 2024 led to massive institutional inflows in Q3 and Q4 2024. Bitcoin ETFs absorbed liquidity during a phase of expanding M2 Global Supply, creating an early demand surge that front-loaded buying pressure and was unique to this cycle.
• Bitcoin reached an all-time high before the halving. In all previous cycles, Bitcoin’s all-time high (ATH) came 12-18 months after the halving. This cycle, Bitcoin hit an ATH at $73K$ before the April 2024 halving – a first in Bitcoin’s history.
• Liquidity tightened post-Q2 2024. While M2 Global expanded during Q1 and Q2 2024, liquidity conditions tightened in Q3 and Q4 as the Fed maintained high interest rates and repeatedly postponed rate cuts before finally lowering rates to 475 bps in December 2024.
• ETF netflows have turned negative. Since February 2025, ETF Net Flows turned negative, suggesting institutions are de-risking or taking profits.
• NASDAQ Composite and Bitcoin are showing correlated weakness. Historically, Bitcoin has followed a risk-on/risk-off pattern with equities. The NAS- DAQ Composite peaked in Q4 2024, and since then, market sentiment has weakened.
• Quantitative Easing is not the Fed’s tool of choice. The Fed has not signaled any immediate plans for Quantitative Easing (QE).

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:

• Post-election year market weakness is historically temporary. Historically, post-election years tend to be weak for equities from February to April before rallying in the second half of the year.
• Historical cycle timing still leaves room for a second peak. The past two market cycles have lasted for 12-18 months post-halving before topping out.
• M2 Global money supply has been expanding again. Despite a resumed growth phase in H2 2024, the M2 Global has been expanding again, increasing available liquidity.
• Inflation is slowly decreasing towards the Fed’s 2% target. After taking a break from its rapid decrease in H2 2024, the Core PCE (YoY) is again on track reaching the Fed’s target rate of 2% setting the ground for looser financial conditions.
• Unemployment is not rising. The Unemployment Rate has stabilized rather than surging with the labor market remaining strong enough to prevent a full economic contraction. Historically, deep bear markets require rising unemployment, which is not occurring.
• ETF net outflows have been declining again. Recent data shows declining outflows suggesting that at some point inflows will resume and lead to renewed institutional demand.

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.