Bitcoin's Market Shifts to a Two-Year ETF Cycle, Says Investment Firm CIO
The traditional four-year Bitcoin halving cycle, long a cornerstone of market analysis, is becoming obsolete, replaced by a new two-year rhythm driven primarily by institutional investors and Bitcoin ETF dynamics. This is the central thesis put forth by Jeff Park, Chief Investment Officer (CIO) at ProCap, who argues that Bitcoin's boom-bust phases are now governed more by "fund-manager economics" than by the original "mining economics."
The Fading Influence of Halving Events
Historically, Bitcoin's price cycles were closely linked to its halving events, which periodically cut the supply of new Bitcoin and compressed miner margins, leading to reduced selling pressure. This created a reflexive loop of early positioning, rising prices, media hype, and retail FOMO, often culminating in a market bust. However, Park contends that this mechanism is significantly diluted today. With most of Bitcoin's total supply already in circulation, each halving event now shaves off a much smaller fraction of the total float. This "diminishing marginal inflation impact" means the supply shock alone is no longer robust enough to independently drive the next market cycle.
The Rise of ETF-Driven Dynamics
Park introduces a new framework for understanding Bitcoin's market behavior, centered on three key assumptions. First, institutional investors, especially those utilizing highly liquid fund investment vehicles, operate with de facto 1-to-2-year investment horizons. Second, new net liquidity into Bitcoin will increasingly flow through ETF channels, making these funds critical indicators. Third, while the selling behavior of legacy "OG whales" remains a significant supply variable, Park's analysis primarily focuses on ETF-centric forces. Within this new paradigm, two critical concepts emerge: common-holder risk, where concentrated ownership amplifies market moves, and the crucial impact of calendar-year P&L (profit and loss) crystallization. Hedge funds, for instance, are more inclined to sell risky positions as the year-end approaches if their performance goals aren't sufficiently "baked in" to secure their annual targets or bonus pools. This new dynamic creates a distinct two-year cycle. For an investment firm to justify holding Bitcoin, it typically needs to project a 25-30 percent compound annual return, translating to roughly a 50 percent gain over two years to compensate for risk and fees. Using this hurdle rate, Park illustrates how different cohorts of ETF investors face varying pressures. For example, investors who bought via ETFs from inception through year-end 2024 are up roughly 100% in a single year, effectively pulling forward 2.6 years of performance. Conversely, those entering on January 1, 2025, are approximately 7% underwater, needing an 80% return over the next year or 50% over two years to meet their hurdle. This stark difference in performance by entry vintage highlights the liquidity pressures that can drive selling decisions, especially if Bitcoin's price stagnates or drops. Park stresses that monitoring the average ETF cost basis and the moving average of P&L by vintage will be crucial to identifying future liquidity pressures and market "circuit breakers," ultimately superseding the long-held halving narrative.
