How understanding Bitcoin’s repeating four-year cycles and the US business cycle can reveal its true market path
Bitcoin’s price swings look like a magic trick — soaring 10,000% in 3 years, then crashing by 85%, only to repeat similar feats in cycles. But beneath these dramatic moves lies a deeper rhythm tied to the broader economy. This article breaks down Bitcoin’s historic four-year cycle, reveal the business cycle driving it, and shows how liquidity flows in the US financial system hold keys to Bitcoin’s next act. If you’re an investor trying to separate hype from signal, understanding these forces can help you anticipate Bitcoin’s likely path through coming years.
Decoding Bitcoin’s Four-Year Cycle
Since 2015, Bitcoin has followed a striking pattern:
- 2015–2018: From a bottom, Bitcoin rallied roughly 10,000% in 36 months, topping before a 12-month bear market saw an 85% price drop.
- 2018–2021: Another bottom sparked a 2,000% surge over 36 months, followed again by a 12-month bear market with an 80% decline.
- 2022–2025: Bitcoin climbed 700% over 36 months, peaking in October 2025, then promptly dropped 35%, tracking earlier cycles.
This consistent 4-year rhythm, often called Bitcoin’s four-year cycle, looks predictable on the surface. Media and many investors expect history to repeat, with prices potentially revisiting $30,000 by late 2026. ### Answer Box
What drives Bitcoin’s four-year price cycle?
Bitcoin’s price tends to follow a repeating four-year cycle tied to the US business cycle. Economic expansions fuel Bitcoin rallies, while contractions lead to bear markets. The cycle is influenced by liquidity—availability of money in the financial system—and human behaviors of risk-taking and spending.
The Business Cycle: More Than Just Economic Jargon
Bitcoin’s four-year swings reflect something bigger: the business cycle. This cycle describes how the economy naturally expands and contracts over time. It has four phases:
- Expansion: Employment is strong, spending and profits grow, investors get risk-seeking.
- Peak: Economy runs hot, inflation rises, investor complacency grows.
- Contraction: Spending slows, layoffs rise, markets become risk-off (averse).
- Trough: Economic data is weakest, pessimism peaks, often coinciding with recessions.
Human behavior drives this cycle—people overextend during expansions and retrench during contractions. Economies don’t move in a straight line but in these repeating waves.
The ISM Manufacturing PMI: A Key Economic Pulse
The ISM (Institute for Supply Management) manufacturing PMI (Purchasing Managers’ Index) tracks economic expansion or contraction monthly. A PMI above 50 signals expansion, below 50 contraction, and around 50 neutrality.
Historically, this PMI has followed a roughly 4-year cycle closely linked to Bitcoin’s price:
- When PMI accelerates above 50, Bitcoin tends to rally.
- When PMI dips below 50, Bitcoin often enters bear markets.
Currently, PMI hovers near neutral, suggesting possible contraction through late 2026. ### Data Callout
Bitcoin price vs. PMI correlation: During past cycles, Bitcoin’s rally phases aligned with PMI readings above 50 (economic expansion). During bear markets, PMI dropped below 50 (contraction). This strong correlation highlights Bitcoin is not just a standalone asset but reacts closely to macroeconomic conditions.
Liquidity: The Fuel Behind Economic and Bitcoin Cycles
What determines the business cycle’s length and intensity? Liquidity — how much money is flowing through the US financial system. When liquidity rises, borrowing, spending, and investing increase, pushing economic activity and PMI higher. When liquidity tightens, these slow, leading to contraction.
Three Key Components Shaping US Liquidity
- Federal Reserve Balance Sheet
Peaks at ~$9 trillion in mid-2022, then shrank by about $2.4 trillion through “quantitative tightening” (QT) — effectively pulling liquidity out. Since late 2025, QT ended. The Fed now plans to buy $40 billion in short-term Treasury bills monthly, boosting liquidity similarly to mid-2019 operations. This shift moves liquidity from a drag to a boost. - Treasury General Account (TGA)
The government’s checking account at the Fed. When TGA balance falls, money flows into the economy (adding liquidity). When it rises, funds move out, tightening liquidity. In 2025, the government rebuilt TGA to over $950 billion, reflecting a temporary cash pile during a shutdown. Since reopening, TGA has been declining, releasing liquidity back into the system. - Credit Conditions & Bank Lending
Though less detailed in the transcript, credit availability normally aligns with liquidity. Tight credit reduces risk-taking; easy credit fuels expansion.
The interplay among these components will heavily influence whether liquidity grows or shrinks — and thus whether Bitcoin finds more room to rally or heads into another contraction.
Risks & What Could Go Wrong
- Liquidity Misreads: If liquidity does not grow as expected, the economic contraction could deepen, pressuring Bitcoin further.
- Federal Reserve Policy Shifts: Unexpected hawkish moves to fight inflation could tighten liquidity rapidly.
- Government Fiscal Actions: Sudden changes in government spending or debt issuance can drastically shift TGA balances.
- Macro Shocks: Events like geopolitical crises, pandemics, or major regulatory changes could disrupt cycle patterns.
These risks mean Bitcoin’s historical four-year cycle, though instructive, is not guaranteed to repeat precisely.
Actionable Summary for Investors
- Bitcoin’s price is entwined with the US business cycle, particularly economic expansions and contractions.
- The ISM manufacturing PMI is a useful real-time gauge of economic phases and Bitcoin’s likely direction.
- US financial system liquidity is the ultimate driver; increases typically boost Bitcoin, while contractions drag it down.
- Recent Fed actions and government spending suggest a potential shift toward liquidity growth, which could support Bitcoin rallies.
- However, macroeconomic risks and policy uncertainties require cautious interpretation of cycle signals.
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Frequently Asked Questions (FAQs)
Q1: What is Bitcoin’s four-year cycle?
Bitcoin’s four-year cycle describes its historical pattern of roughly 3 years of strong price rallies followed by about 1 year of steep declines. This cycle aligns closely with the US business cycle phases.
Q2: How does US economic data impact Bitcoin prices?
Key economic indicators like the ISM manufacturing PMI signal whether the economy is expanding or contracting. Bitcoin tends to rise during expansions and fall during contractions, reflecting investor risk appetite.
Q3: What role does liquidity play in the economy and Bitcoin?
Liquidity represents the amount of money available for spending and investment. Rising liquidity encourages growth and Bitcoin rallies; withdrawing liquidity can cause economic slowdowns and Bitcoin bear markets.
Q4: Why is the Federal Reserve’s balance sheet important?
The Fed’s balance sheet reflects its asset purchases or sales affecting liquidity. Expansion supports markets by injecting money, while shrinking the balance sheet tightens liquidity.
Q5: Can the Bitcoin cycle fail or change?
Yes. External shocks, policy changes, or shifts in economic fundamentals can disrupt the cycle. While past patterns suggest tendencies, no cycle is guaranteed.
Disclaimer: This article is for informational purposes and does not constitute financial advice. Bitcoin and other cryptocurrencies are highly volatile and risky. Always conduct thorough research and consider your risk tolerance before investing.
By Wolfy Wealth - Empowering crypto investors since 2016
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