The end of the 4-year cycle?: ETFs, regulation, and institutional funds redefine the crypto market

According to Matt Hougan, the traditional four-year crypto market cycle has become irrelevant. ETFs, regulation, and institutional funds are now the forces shaping the course of the digital ecosystem. 

“The halving is half as important every four years.” With that statement, Matt Hougan, director of research at Bitwise, signaled a paradigm shift in understanding the cyclical behavior of cryptocurrencies. The statement, supported by data and the growing institutionalization of the ecosystem, posits a scenario in which old narratives of explosive cycles give way to deeper and more lasting structural trends.

Hougan's thesis is not limited to a short-term observation: the forces that have defined market cycles for more than a decade, such as the Bitcoin halving or aggressive monetary policy, while still relevant, are losing their ability to generate booms and busts. Instead, dynamics are emerging that operate over longer time horizons, such as the migration to ETFs, the entry of pension funds and endowments, and the advancement of stable regulatory frameworks.

Halving and interest rates: old catalysts that lose power

In a post on X, Hougan he highlighted that for years the prevailing narrative revolved around the halving Bitcoin as a driving force behind bullish cycles. Each halving of the network's block rewards resulted in a decrease in the new supply of BTC, which historically translated into price increases. However, the impact of this phenomenon appears to be fading. 

Since the last halving, which took place in April 2024, the price of BTC has risen by around 85%, going from $64.800 to $119.600 today. While this is significant growth, it still pales in comparison to previous increases, which historically reached increases in the thousands of percent. 

For example, after the First HalvingIn November 2012, the price of Bitcoin went from $12 to $150, in April 2013, which represented an increase of 1.250%. After the second halvingIn July 2016, the price of the cryptocurrency went from $ 650 to $ 20.000, by December 2017, rising by more than 3.000%. Finally, after the third halving, which took place in May 2020, BTC went from trading at around $ 8.700 to $ 69.000, a value that was reached in November 2021 and which represented an increase of 790%. 

In addition to the impact of the halving, Hougan also points out that the relationship between cryptocurrencies and interest rates has shifted. In previous cycles, such as those in 2018 and 2022, rate hikes by the Federal Reserve coincided with significant drops in the price of digital assets. Today, the correlation has partially reversed: in an environment of higher inflation and a search for alternative assets, cryptocurrencies are gaining appeal.

Added to this is another key element: regulatory strengthening. The growing presence of coherent legal frameworks reduces systemic risk and provides confidence to both retail and institutional investors. Given this, Hougan suggests that the explosion of risk is waning because the space is more regulated and institutionalized.

ETFs and the emergence of Wall Street

The approval of multiple Bitcoin and Ethereum ETFs in 2024 marked the beginning of a transformative trend. Beyond the impact on volume or price, their significance lies in the time horizon they inaugurate: the movement toward regulated, low-cost vehicles is a five- to ten-year dynamic, not a short-term stimulus.

ETFs are serving as a gateway for traditionally conservative players: pension funds, university endowments, and institutional managers who are only just beginning to seriously consider cryptocurrencies as part of their strategic portfolios. This process is gradual but consistent.

Hougan cautions that institutional adoption is just beginning, with many crypto ETFs only just being approved, and large funds just exploring exposure to crypto assets through these financial instruments. 

“Wall Street is just now beginning to build on cryptocurrencies and will invest billions in the coming quarters and years. This began in earnest with the passage of the GENIUS Act this month.” Hougan points out.

Regulatory clarity as a catalyst for the crypto market

Since January, following Donald Trump's assumption of the US presidency, the regulatory approach to the crypto market has taken a new direction. Now, with the passage of the so-called GENIUS Act and other ongoing laws such as the CLARITY Act, standards are being formalized so that companies in the sector can operate with greater clarity and security. This increased clarity and security also extends to institutional investors and funds. 

Hougan points out that the established oversight mechanisms balance innovation with consumer protection, allowing large Wall Street firms to accelerate their exposure to the cryptocurrency sector. This is evident since the regulations came into effect, as several companies have announced plans to invest billions in crypto products, including derivatives, regulated staking, and institutional custody solutions.

Hougan summarizes this process as a sustained and constant movement. In his words, “All of this suggests to me that long-term pro-crypto forces will overwhelm the classic “four-year cycle” forces, to the extent they exist, and that 2026 will be a good year.”

In short, Hougan believes the future scenario is moving away from the "four-year boom and bust" pattern that traditionally characterized the crypto market. The combination of migration to ETFs, institutional adoption, regulatory clarity, and the diminished influence of the halving creates a more stable environment less prone to explosive spikes.

Although this does not imply an absence of volatility, as Hougan acknowledges that it will continue to be significant, the trend is towards sustained growth. "I think we have some good years ahead. It won't be a supercycle, but it will be a steady boom."He said. 

Hougan's assertion isn't based on speculation, but rather on an analysis of underlying market forces. Thus, the classic four-year cycle isn't necessarily "dead," but it is being overshadowed by long-term factors. According to Hougan, the narrative of the next Bitcoin and cryptocurrency cycle won't be one of the halving, but rather one of investment funds, clearer laws, and more mature financial structures.