Bitcoin's “four-year cycle” theory, one of the most established investment strategies in the crypto market, is facing a serious test with the entry of institutional investors into the space.
Appearing on CNBC's Crypto World program, Matt Hougan, Chief Investment Officer (CIO) of Bitwise Asset Management, and Sebastian Bea, CIO of ReserveOne, provided some surprising insights into the future of Bitcoin and changing market dynamics.
Bitwise CIO Matt Hogan has argued that Bitcoin's historic four-year price cycle based on halving events is no longer valid. “The four-year cycle is being replaced by a '10-year bull market,'” Hogan said.
According to Hogan, exchange-traded funds (ETFs) approved in early 2024, regulatory developments and the rise in stablecoins have become far more dominant than past cyclical forces. Hogan noted that BTC has become even more volatile than Nvidia in the last year, and said institutional adoption is still in its early stages. He claimed that the average institutional investor goes through an evaluation process that spans about eight meetings (or eight quarters) before making a Bitcoin allocation.
ReserveOne CIO Sebastian Bea said it may be too early to say the cycle is completely over, but the market structure has fundamentally changed. Bee pointed out that individual investors generally act based on price (momentum-based), whereas institutional investors act on the principle of “strategic asset allocation.”
According to Bee, financial institutions create a stabilizing force in the market by purchasing Bitcoin to maintain balance in their portfolios when prices fall. This allows BTC to experience a smoother decline instead of the steep 60-80% declines of the past.
Both speakers agree that the nature of discussions with institutional investors has completely changed over the past five years. Matt Hogan recalls that five years ago, investors were asking basic technical questions like “What is BTC?” While there were questions such as “How is Bitcoin mined?” and “How is it mined?”, today the discussion has evolved to more specialized and applied questions such as “How does Bitcoin affect portfolio correlation?” or “Where does it fit in as a hedge against inflation?”
The discussion also addressed the impact of the new US administration and the Federal Reserve's interest rate decisions. Sebastian Bee pointed out that Bitcoin is now clearly recognized as a “commodity”, reducing regulatory uncertainty. But he added that the market is now looking not just at political statements, but also at the liquidity situation and the Fed's actions.
*This is not investment advice.
