Tom Lee Warns That Institutional Buying Could Disrupt Bitcoin's Traditional 4-Year Cycle

Tom Lee has warned that institutional investors may break down Bitcoin's traditional four-year cycle, as the continuous inflow of institutional investment over the past two years has created a counter-cyclical momentum for the market. In a recent interview with Mario Nawfal, Lee, the Chairman of Bitmine, explained that Bitcoin's four-year cryptocurrency cycle stems from its halving mechanism.

Lee emphasized that the market has moved beyond retail dominance, noting that 2024 has seen institutional buyers and the launch of ETFs bringing stable capital flows to Bitcoin, shifting away from the price surges driven by supply shortages in the previous four-year cycle that have propelled the entire cryptocurrency market. Tom Lee: "The Liquidity of the Stock Market Has Ended the Traditional 4-Year Cycle of Bitcoin" According to Lee, the cryptocurrency market is facing two major challenges: whether Bitcoin can maintain its traditional downtrend cycle next year, or whether it will decouple from the stock market with which it has a strong correlation. If both scenarios occur, periodic discussions in the cryptocurrency market may gradually diminish. For over a decade, the Bitcoin market model has seemed very predictable. Every four years, the halving event, which is the program to reduce mining rewards, will trigger a ripple effect. The price will soar to a new peak, then plunge into the brutal "crypto winter" before starting the cycle again.

This model has almost become sacred to cryptocurrency traders. However, some of the most renowned analysts in the industry now suggest that this era may be coming to an end. Supporting Lee's viewpoint, Pierre Rochard, CEO of The Bitcoin Bond Company, also believes that the traditional cycle has lost its relevance, as evidenced in a recent social media post. His theory refers to a fundamental change, as only 5% of Bitcoin remains unmined, the impact of the supply halving is significantly weaker than before.

In the early years of Bitcoin, the reduction of rewards for miners caused significant disruptions in the market flow. Currently, the main catalysts of the market may be institutional investment flows, managed investment vehicles, and global macroeconomic factors. Jason Dussault, CEO of Intellistake.ai, also sees the increase of organizations buying shares as a representation of structural transformation. "The split still makes sense, but it is no longer the main driving force," he explained to CryptoNews. Current price volatility is equally influenced by global liquidity conditions, ETF capital flows, and investor sentiment, as well as by supply mechanisms on-chain. He added: "Bitcoin is increasingly reacting to similar factors that affect stocks, bonds, and commodities." In July, Bitwise's Chief Investment Officer, Matt Hougan, suggested that the traditional four-year cryptocurrency cycle may no longer dictate current market behavior. In a collaborative discussion with Bitcoin supporter Kyle Chassé and Bloomberg ETF analyst James Seyffart, Hougan suggested that the historical framework is deteriorating, potentially giving way to a longer and more sustainable growth phase. He emphasized that the passage of the GENIUS Act in July was an important development, arguing that this law allows Wall Street to build financial products focused on cryptocurrency. Glassnode Data Confirms That Bitcoin's Traditional 4-Year Cycle Remains Intact However, not all analysts are ready to declare that this cycle has ended. In an interview with CryptoNews, Connor Howe, CEO of Enso, argued that the impact of halving has weakened rather than been eliminated. "The halving still has significant implications for the mining economy and long-term scarcity, but traders can no longer rely on the strict four-year framework." Moreover, recent research by Glassnode shows that the traditional four-year cycle of Bitcoin still maintains structural integrity.

The blockchain analysis company determines that the current cycle duration of Bitcoin and the profit-taking behavior of long-term holders are very similar to previous cycles, with the all-time highs in both the 2015-2018 and 2018-2022 cycles occurring 2-3 months after the current timeline. This data shows that the maturity cycle is consistent with historical precedents rather than the end of the underlying 4-year structure. On the 4-hour chart, Bitcoin dropped to a weekend low of $109,977 before recovering to $112,150 at the time of the press report, although investor confidence remains fragile.

This prospect has dampened the optimistic sentiment as investors are currently questioning whether BTC can surpass last month's peak of 124,128 dollars. A recent market survey found that nearly 70% of respondents predict the price will drop to $105,000 before any potential upward movement.