• Bitcoin’s historic four-year cycle is breaking as 2025 price action diverges from halving-driven trends.
• Correlations with liquidity and economic indicators like PMI have weakened, pushing Bitcoin into a more macro-driven market structure.
• Sentiment now dominates short-term movement, while long-term demand continues to set Bitcoin’s broader trajectory.

Since its inception in 2009, Bitcoin has shown a consistent four-year cycle. It’s driven by massive moves centered around Bitcoin’s halving, peaking with a blow-off top the next year.

Since the 2024 halving, Bitcoin prices have trended higher, but none of the signs of a speculative blow-off top have occurred in 2025, at least within the timeframe consistent with the four-year cycle.

Without that blow-off top, the rest of the crypto market has stalled out, since soaring Bitcoin prices tend to kick off altcoin season.

End of the Famous Bitcoin Cycle?

With Bitcoin prices down 30% from their early October highs, it’s clear that the four-year price cycle has lost its validity.

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This is a sensible development, since BTC is rapidly maturing as an asset class. Rising institutional interest also means that Bitcoin’s cycles will more likely center around economic cycles.

One area where investors have noted a strong correlation with Bitcoin is with global liquidity:

While there has been a strong correlation since the start of 2024, even that trend has broken in recent months.

Should that trend establish itself, Bitcoin could jump higher – and even kick off an altcoin season.

Michael Saylor recently called out the four-year cycle as “dead.” Saylor sees a massive repricing soon, which may explain his rush this year to acquire as much Bitcoin as possible.

However, liquidity isn’t the only factor.

Economic Activity

Some investors today are turning to the relationship between Bitcoin’s price and the US Purchasing Managers’ Index (PMI).

The PMI measures manufacturing sector health and serves as an economic leading indicator. 

When PMI is above 50, it suggests expansion; below 50 indicates contraction. 

In theory, a strong PMI signals economic growth, which could influence Bitcoin through several channels:

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• Strong PMI → robust economy → risk-on sentiment → higher appetite for speculative assets like Bitcoin
• Weak PMI → economic concerns → potential Fed easing → more liquidity → potentially supportive for Bitcoin

However, even tools like PMI fail to work as a one-stop indicator for Bitcoin and the crypto cycle. 

Sometimes, Bitcoin trades as a “risk-on” asset (correlating positively with stocks and economic strength). 

Other times, it trades as a “risk-off” hedge (like digital gold during uncertainty), and it will even move independently based on crypto-specific factors.

Data also shows that the correlations between Bitcoin and PMI are unstable and vary across different time periods.

Bitcoin often responds more strongly to monetary policy signals (Fed decisions, liquidity conditions) than to real economy indicators like PMI.

When PMI does seem to matter, it’s typically through the broader risk sentiment channel rather than a direct mechanistic relationship.

If you’re looking to use PMI as a Bitcoin trading signal, you’d likely find it less reliable than monitoring Fed policy, liquidity conditions, or crypto-native metrics. But a growing economy likely won’t hurt – as sometimes that can push Bitcoin higher even when monetary conditions are tightening.

Sentiment – The Factor that Can Drive Extremes

Cryptocurrencies, particularly Bitcoin, lack traditional valuation anchors like earnings, dividends, or cash flows. 

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Without these fundamental metrics, price discovery relies heavily on what people believe the asset should be worth. 

This creates space for sentiment to be the primary driver. 

Studies of crypto market behavior consistently show that social media activity, search trends, and news sentiment have measurable predictive power for short-term price movements in ways that exceed their impact on traditional assets.

The crypto market also has structural features that amplify sentiment, including high retail participation (which leads to more emotional trading), 24/7 trading (with no circuit breakers to cool emotions), high leverage availability, and rapid information dissemination through crypto-native social channels. 

Fear and greed cycles can become self-reinforcing quickly.

Here’s where it gets complicated: what looks like “pure sentiment” often includes assessments of fundamental factors. 

When investors get excited about institutional adoption news, is that sentiment or recognition of changing supply/demand fundamentals? 

When macro concerns drive people toward Bitcoin as a hedge, sentiment is the transmission mechanism for macro factors.

During stable periods, you might see something like: 40% macro conditions (Fed policy, inflation, dollar strength), 30% supply/demand fundamentals (adoption metrics, on-chain activity, halving cycles), and 30% pure sentiment/speculation.

During euphoric bull runs or panic crashes, sentiment could dominate at 60-70%+, temporarily overriding both fundamentals and macro logic. 

These are the periods where asset prices detach most dramatically from any rational valuation model. Investors who can recognize when sentiment is in control are best positioned to profit from those conditions.

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Academic studies attempting to decompose crypto returns generally find that sentiment indicators explain 20-40% of price variance in normal conditions, but this can spike much higher during extreme market phases. 

Notably, crypto markets show much stronger “momentum” and “herding” effects than traditional markets, which are often hallmarks of sentiment-driven trading.

The cryptocurrency market is probably best understood as fundamentally sentiment-driven in the short to medium term, with macro and supply/demand factors providing boundaries and direction over longer timeframes. 

Bringing It Together

Clearly, there’s no one signal or trend for investors to look at to determine Bitcoin’s cycles. 

An expanding economy should be bullish for Bitcoin prices. A contracting one shouldn’t be – unless there’s a massive infusion of liquidity in the system.

Individual indicators like global liquidity, credit market conditions, business conditions and market sentiment will all play a role.

Beyond Bitcoin, individual crypto projects working on real-world problems will rise or fall with their prospects. 

Meme coins will rise and fall much faster – driven by the short-lived magic of memes themselves.

But bear in mind, even with Bitcoin moving beyond its four-year, retail-driven cycle, the fundamental concept remains intact.

As Bitwise CIO Matt Houghton recently noted:

“The reason bitcoin’s price is up ~28,000% over the last ten years is that more and more people want the ability to store digital wealth in a way that isn’t intermediated by a company or a government.”

And when Bitcoin takes off again, the altcoins will follow.

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