Bitcoin is currently entrenched in a bear market, with traders bracing for further declines amid geopolitical tensions, particularly following the onset of the Iran war. CK Zheng, founder of ZX Squared Capital, expressed concerns over the cryptocurrency’s trajectory, predicting an additional 30% price decrease by 2026. This bearish sentiment comes in stark contrast to last year’s historical peak when Bitcoin reached over $126,000; the digital currency has since plummeted to around $68,000.
One of the pivotal theories amongst crypto enthusiasts is the “four-year cycle.” This framework suggests that Bitcoin experiences a pattern where prices ascend, crash, and then recover, significantly influenced by the quadrennial halving of mining rewards. Most recently, in April 2024, the Bitcoin network reduced its supply expansion rate, resulting in the emission of 3.125 BTC for each block mined—a reduction from the initial 50 BTC set at its launch.
Historically, Bitcoin valuations have tended to peak approximately 16 to 18 months post-halving, a timeline aligning with the October highs observed last year. As such, analysts and investors are now speculating that the market may dive deeper into bearish territory as this cycle unfolds.
Zheng emphasized that the psychological behaviors of individual investors play a crucial role in perpetuating this cycle. He noted that investors often buy during periods of hype and panic sell when prices decline, reinforcing the cyclical pattern that has typified crypto markets for over a decade. Consequently, Bitcoin continues to be viewed more as a speculative asset rather than a stable store of value akin to gold.
Institutional engagement with Bitcoin remains scant, which Zheng highlighted as another significant factor contributing to the prevailing market conditions. He warned that some companies that have acquired Bitcoin as a treasury asset may find themselves compelled to liquidate their holdings due to financial pressures, exacerbating the downward trend in pricing.
Currently, the aggregate size of crypto exchange-traded funds (ETFs) and digital asset treasury firms constitutes only about 10% of the overall crypto market. Zheng’s assessment indicates that these external pressures may contribute to a self-reinforcing cycle that further depresses prices.
In summary, the outlook for Bitcoin appears increasingly grim, with indications that the bear market may continue to persist before any recovery phase can commence. Investors and observers alike are bracing for a turbulent period ahead.
