Has Bitcoin's 4-Year Halving Cycle Evolved Into a Liquidity-Driven Market?

Bitcoin's 4-year halving cycle has long been a cornerstone of its narrative, with historical price surges often tied to the event's supply-reducing effect. However, in 2024-2025, a confluence of institutional adoption, regulatory clarity, and macroeconomic shifts has begun to redefine Bitcoin's market dynamics. The question now is whether the halving cycle remains a dominant force-or if Bitcoin has transitioned into a liquidity-driven asset, shaped by institutional flows and macroeconomic signals.

Institutional Adoption: The New Catalyst

The launch of U.S. spot Bitcoin ETFs in January 2024 marked a tectonic shift. By mid-2025, global Bitcoin ETF assets under management (AUM) reached $179.5 billion, with BlackRock's iShares Bitcoin Trust (IBIT) capturing 48.5% of the market share by amassing $50 billion in AUM according to PowerDrill AI analysis. This institutional influx was catalyzed by regulatory clarity from the U.S. Securities and Exchange Commission (SEC), which approved spot ETFs after years of enforcement actions, and the Trump administration's 2025 executive order removing barriers like SAB 121, allowing banks to custody crypto assets.

The result? Bitcoin's trading patterns have shifted dramatically. By 2025, 57.3% of Bitcoin trading now occurs during U.S. market hours, up from 41.4% in 2023. Institutional custody solutions, led by Coinbase Custody managing 85% of ETF Bitcoin holdings, further centralize liquidity. This institutionalization has embedded Bitcoin into traditional financial infrastructure, with ETF flows now tying its demand to U.S. monetary policy and risk-on sentiment.

Macroeconomic Factors: From Scarcity to Liquidity

Bitcoin's traditional scarcity narrative-reinforced by the 2024 halving, which cut annual issuance from 1.7% to 0.85%-initially drove its price to $109,000 in early 2025. Yet, by year-end 2025, Bitcoin closed with a negative return for the first time in a post-halving year. This deviation from historical patterns underscores a critical shift: Bitcoin's price is no longer solely driven by supply shocks but by liquidity dynamics and macroeconomic interplay.

The U.S. Federal Reserve's dovish pivot in late 2024 and early 2025-anticipating rate cuts-fueled liquidity in risk assets, including Bitcoin. Lower interest rates made long-term Bitcoin treasury strategies more attractive, with companies like MicroStrategy allocating 257,000 BTC in 2024 alone. Meanwhile, Bitcoin's correlation with the S&P 500 has strengthened, reflecting its evolution into a high-beta macro asset as reported by Yahoo Finance.

The Halving's Evolving Role

While the 2024 halving reduced Bitcoin's supply inflation to 0.85%, its impact on price was muted compared to past cycles. By 2025, 94% of Bitcoin had already been mined, diminishing the supply shock effect. Instead, institutional flows and macroeconomic factors-such as global M2 money supply growth-now dominate price dynamics according to SSRN research. For example, Bitcoin's price stabilized in the $87k–$88k range in late 2025, reflecting institutional accumulation rather than retail speculation.

This shift is further evidenced by Bitcoin's role as a hedge against fiat debasement. While it does not behave as a traditional inflation hedge, its integration into corporate treasuries and institutional portfolios highlights its appeal as an alternative store of value.

Future Outlook: A Liquidity-Driven Bull Market

Looking ahead, 2026 is positioned to mark the end of the four-year cycle, with Bitcoin potentially reaching new all-time highs. Institutional adoption is accelerating: 86% of institutional investors now have or plan to allocate to digital assets, and 94% believe in blockchain's long-term value. Regulatory frameworks, including the U.S. GENIUS Act and stablecoin approvals, will further ease entry as noted by SSGA.

However, volatility persists. Macro uncertainties such as U.S. tariff concerns and the Bybit security breach temporarily disrupted sentiment in early 2025. Yet, the broader trend remains clear: Bitcoin's liquidity is increasingly driven by institutional flows and macroeconomic signals, not just supply-side mechanics.

Conclusion

Bitcoin's 4-year halving cycle is not dead, but its influence has evolved. The asset's price dynamics are now shaped by institutional adoption, regulatory clarity, and macroeconomic interplay. As liquidity becomes the primary driver, Bitcoin's role in portfolios is shifting from speculative bet to strategic allocation. For investors, the key takeaway is that the future of Bitcoin lies not in its scarcity alone, but in its integration into the liquidity-driven architecture of global finance.