Bitcoin's 4-Year Cycle and Market Psychology: The Self-Fulfilling Prophecy of Crypto Cycles

The recent plunge in Bitcoin's price below $92,000 has reignited debates about the cryptocurrency's cyclical nature and the role of investor psychology in shaping its trajectory. This decline, occurring amid a $255 million net outflow from U.S. spot Bitcoin ETFs on November 17, 2025, underscores a critical tension between macroeconomic optimism and self-reinforcing market behavior. As BlackRock's IBIT alone accounted for $146 million in redemptions, the broader crypto market-except for Solana ETFs-faced similar outflows, signaling a shift in institutional and retail sentiment. This episode, framed within Bitcoin's historical four-year cycle, reveals how investor expectations can morph into self-fulfilling prophecies, amplifying volatility and distorting price discovery.

The 4-Year Cycle and Historical Precedents

Bitcoin's price history is marked by a recurring four-year pattern tied to its halving events, with peaks observed in 2013, 2017, and 2021. These cycles are not merely technical phenomena but psychological ones, driven by collective expectations. For instance, the 2013 and 2017 bull runs were fueled by speculative fervor, with investors convinced that "this time was different," a mindset that often precedes market tops according to analysis. In 2021, the narrative of Bitcoin as a hedge against inflation and a store of value further entrenched bullish sentiment, even as overbought conditions developed as reported.

The current 2025 cycle appears to follow a similar script. With the last halving in April 2024, analysts have long anticipated a peak around 400–600 days later, placing 2025 in the spotlight. This anticipation has triggered preemptive selling, as investors fear a repeat of historical drawdowns. Bernstein analysts note that the recent 25% drop from October highs reflects a short-term correction rather than a systemic collapse, but the psychological toll is evident according to market analysis. The self-fulfilling nature of this prophecy is clear: as investors sell to avoid a perceived peak, they accelerate the price decline, reinforcing the narrative of an impending downturn.

ETFs and the Amplification of Sentiment

The role of ETFs in this dynamic cannot be overstated. U.S. spot Bitcoin ETFs, which had initially drawn billions in inflows, now face a $1.2 billion net outflow over the past week, according to Farside Investors. These redemptions have created a feedback loop: as funds redeem shares, they inject Bitcoin into the market, increasing supply and further depressing prices. This mechanism is particularly pronounced during New York trading hours, as noted in reports.

The divergence between macroeconomic fundamentals and ETF performance highlights a deeper liquidity challenge. While the resolution of the U.S. government shutdown briefly steadied risk assets, the persistent outflows from ETFs suggest that institutional confidence remains fragile. This disconnect mirrors past cycles, where policy optimism and technical overbought conditions collided, leading to abrupt corrections. For example, in 2013, the S&P 500's overbought status and speculative euphoria culminated in a sharp sell-off, even as macroeconomic indicators improved.

The Psychological Underpinnings of Self-Fulfilling Prophecies

The concept of self-fulfilling prophecies in financial markets is well-documented. In crypto, this phenomenon is amplified by the influence of social media, celebrity endorsements, and algorithmic trading. For instance, Binance's CZ has observed how public disclosures of personal investments can trigger short-term price swings, with market participants reacting to sentiment rather than fundamentals. Similarly, the current Bitcoin sell-off is driven by a collective belief in the 2025 peak narrative, which has become a self-fulfilling prophecy as investors act on it.

Academic analyses of past cycles reinforce this dynamic. In 2017, the S&P 500's "dangerously overbought" status was accompanied by irrational exuberance, with investors justifying bullishness despite weak fundamentals. The same psychology appears to be at play in 2025, where the fear of missing out (FOMO) during the halving cycle clashes with the fear of a crash. This duality creates a volatile environment where even minor news events-such as ETF outflows-can trigger disproportionate reactions.

A Stronger Foundation or a Weaker Cycle?

Despite the recent weakness, some analysts argue that the current market environment is fundamentally stronger than in previous cycles. Institutional adoption via ETFs has increased, with corporate treasuries and institutional investors providing a stabilizing force. Additionally, political support for crypto under the Trump administration and favorable liquidity conditions offer structural tailwinds as reported. These factors suggest that the current correction may be shallower than historical 60–70% drawdowns, with Bitcoin potentially finding support near $80,000 according to forecasts.

However, the self-fulfilling nature of the 4-year cycle remains a wildcard. If investors continue to sell based on the expectation of a 2025 peak, the correction could deepen. Conversely, if fresh demand from corporate buyers and ETFs outpaces distribution, Bitcoin may stabilize and resume its long-term uptrend. The key will be whether liquidity returns evenly across trading venues and whether macroeconomic optimism can overcome the psychological drag of redemptions according to market observers.

Conclusion

Bitcoin's 4-year cycle and the self-fulfilling prophecies that accompany it illustrate the interplay between market psychology and financial fundamentals. The recent price drop below $92,000, driven by ETF outflows and investor anxiety, is a case study in how expectations can shape reality. While historical patterns suggest a potential bottom near $80,000, the path forward will depend on whether the market can reconcile its collective fears with the structural strengths of institutional adoption and political support. For now, the crypto market remains a theater of self-fulfilling narratives, where the line between prophecy and reality blurs with every trade.