Explore the current Bitcoin downturn, forecasted 30% drop by 2026, and the impact of the four-year mining reward cycle.
Current State of Bitcoin
Bitcoin (BTC) is currently experiencing a severe downturn, firmly entrenched in the deepest phase of a bear market. According to CK Zheng, the founder of crypto investment firm ZX Squared Capital, the situation is dire. Zheng forecasts a further 30% price drop by 2026, citing the "four-year cycle" as a key factor. The price of Bitcoin, which has nearly halved since reaching a record high of over $126,000 in October of the previous year, is currently trading at around $68,000.
The Four-Year Bitcoin Cycle
Investors often reference the "four-year cycle" in crypto markets, a pattern characterized by surges, crashes, and recoveries, closely tied to the quadrennial mining reward halving. The most recent halving was implemented in April 2024, which halves Bitcoin's supply expansion rate every four years. Presently, 3.125 BTC are emitted per block mined, down from the initial 50 BTC after four halving events. Historically, Bitcoin prices peak around 16–18 months after a halving, followed by a bear market that typically lasts about a year. Given that Bitcoin's price topped out in October of the previous year, roughly 18 months after the April 2024 halving, the current cycle is unfolding as expected, suggesting further market downturns may be imminent.
Psychological Factors Driving the Bear Market
Zheng attributes the difficulty in breaking the four-year cycle to psychological behaviors of individual investors. These behaviors, characterized by buying during hype and selling during panic, reinforce the boom-and-bust pattern. In his view, Bitcoin still functions more as a speculative asset than a safe haven like gold. Zheng notes that institutional adoption of Bitcoin remains limited, and some firms holding Bitcoin as a treasury asset may be forced to sell due to debt servicing requirements, exacerbating the price sell-off.
Institutional and Market Dynamics
Currently, the total size of crypto ETFs and digital asset treasury companies represents only about 10% of the overall crypto market. Zheng warns that during this bear market, some digital asset treasury firms may be compelled to sell their assets, potentially creating a vicious cycle. This could lead to further price drops, as the selling pressure could be substantial. Zheng’s outlook is clear: the current bear market may have further to run before the next cycle begins.
In summary, the current bear market in Bitcoin is expected to deepen, with potential further price drops, driven by psychological investor behaviors and limited institutional adoption. The market's response to these factors will continue to shape the future of crypto assets.
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