The Fundamental Reasons Behind Bitcoin’s Decline: Collapse of the 4-Year Cycle Narrative and the Liquidity Function Shock
The recent decline in the Bitcoin market is not a simple correction or chart pattern issue, but the result of a structural shift caused by the overlap of two major factors: the collapse of the “4-year cycle narrative” and the emergence of the “liquidity function” as the dominant driver of the market. Historically, the Bitcoin market followed a repetitive cycle—halving → supply drop → price surge → profit taking & panic → decline. This pattern shaped Bitcoin’s identity and served as a psychological pillar for investors.
However, starting with the 2024 halving, the market’s scale and structure fundamentally changed. With institutional investors entering in full force, price movement is no longer dictated by retail speculation or simple supply reduction. This downturn signals a deeper shift: the erosion of the traditional ‘post-halving rally narrative’ and Bitcoin’s entry into an environment where liquidity—a core variable in global finance—determines the direction of all asset prices.
1. Weakening of the 4-Year Cycle Narrative and Its Collision With the Liquidity Function
Retrospective analysis shows that the 4-year cycle mechanism had only one upward force—supply reduction. Meanwhile, the primary downward force was always interest rates, or more precisely, liquidity. Historically, Bitcoin bull markets aligned with rate-cut cycles, while bear markets aligned with tightening.
The issue in this cycle is that liquidity contraction now delivers far more direct impact than interest rates alone. Liquidity drops and Bitcoin declines are occurring simultaneously, indicating not coincidence but a transformation in Bitcoin’s asset characteristics.
The current phenomenon—post-halving price stagnation followed by sharp decline—is the result of fear surrounding the end of the halving narrative combined with short-term liquidity depletion. Forced futures liquidations, long-term holders staying on the sidelines, and panic selling among new investors accelerated the drop.
2. Wall Street’s “Reorganization” of Bitcoin — The Wall Street-ization
A silent but massive shift is underway in the Bitcoin market: Wall Street is taming Bitcoin. Wall Street will not leave Bitcoin as a wild, decentralized asset—it is pushing to repackage it into a controllable financial product, reserve asset, or cash system.
Institutional investors are using the current downturn as an opportunity. While retail investors panic under the collapsing cycle narrative, institutions:
- Expand dominance through bottom-buying
- Maximize profits via short positions
- Strengthen control over ETF, futures, and derivatives markets
are gaining significant advantage.
Even Bitcoin’s intrinsic role is being reconsidered. Cathie Wood has suggested that Bitcoin’s payment role may be replaced by stablecoins and Ethereum-based systems, and has consequently revised her 10-year outlook downward.
3. The Trump Administration, Dollar Credibility, and the Dilemma of “Strategic Bitcoin Purchase”
The Trump administration faces pressure to satisfy Wall Street while stabilizing long-term Treasury yields. In this context, its earlier intention to buy Bitcoin as a strategic reserve asset will likely be scaled back—Wall Street does not want such a move. Bitcoin is an asset outside government control, and Wall Street’s core objective is preserving the dollar-based reserve system.
The dollar’s long-term fate is a gradual decline via inflation, and stablecoins will not reverse that trajectory. At best, they may extend the timeline—the length of the rails—not the destination.
4. Guidance for Investors: “Grow Your Container”
Current Bitcoin investors must remember the following:
- You cannot beat the market with charts alone.
- Even knowing the right price is useless if you don’t have the discipline to hold.
- This is a time to strengthen trust, not fear.
- Protecting wealth = long-term perspective + study + emotional discipline.
This downturn is not merely a correction but a test of investors’ belief and psychological resilience. Panic selling builds habits that undermine your future performance and lead to larger losses.
Today’s market moves irrationally under the influence of the illusionary fear of the “4-year cycle”. It is time to let go of this outdated narrative and adopt a new one: Bitcoin is a rational asset driven by liquidity.
Investors should closely monitor the short–long yield spread, liquidity indicators, and shifts in the Federal Reserve’s stance. Fed statements always carry intent—surface-level interpretation is never enough.
