Bitcoin's Enduring Cycles: A Mid-Term Bear Thesis
Despite persistent whispers that this market cycle is fundamentally "different," Bitcoin’s price action continues to echo its cyclical past. Each new peak brings declarations that the traditional cycle model is obsolete, and every cooling period sparks fresh theories about liquidity being the sole driver. Yet, the evidence consistently points towards an underlying pulse that remains. While bear markets might be shrinking, the cadence quickening, and new all-time highs appearing earlier, the fundamental pattern hasn't vanished. My working hypothesis suggests that the next true bear market bottom, marking the cycle's lowest point, is still ahead of us.
The Core Bear Market Expectation: A Swift Descent and Strategic Inflow
My view is straightforward: with the last cycle bottoming in 2023 and the halving delivering an all-time high ahead of schedule, a compressed downturn into 2026 aligns with both historical trends and current market dynamics. This scenario envisions the present rollover evolving into a sharp, rapid decline that could briefly overshoot to the downside, exhausting sellers and clearing the path for another ascent towards a new high before the subsequent halving. In this context, a panic-driven slide towards the high $40,000s would represent the crucial inflection point, fundamentally altering the character of Bitcoin’s buyer base.
The sub-$50,000 range is where sovereign balance sheets, major institutions, and ultra-high-net-worth allocators, who might have "missed" the previous rally, are most likely to deploy significant capital.
This institutional demand is not merely speculative; it’s structural. These sophisticated players perceive Bitcoin not as a short-term trade, but as strategic inventory for their portfolios.
Understanding Bitcoin's Fragility: The Security Budget and Miner Pivots
While institutional interest provides a robust long-term foundation, a critical vulnerability lies within Bitcoin’s security budget. With inscriptions waning and transaction fee revenue retracting to pre-hype levels, miners have been compelled to adapt. Many are now diversifying into AI and high-performance computing (HPC) hosting to sustain cash flow. This pivot helps stabilize their businesses but introduces new elasticity into the network's hashrate, particularly during price downturns. It also means the network leans more heavily on new coin issuance for security at the very moment that issuance is designed to decrease.
The immediate consequence is a market more susceptible to miner behavior, more exposed to dips in fee share, and more prone to rapid, mechanical selloffs when hashprice compresses. These dynamics reinforce the cyclical perspective: shorter bear markets, sharper floors, and a trajectory where the next genuine bottom, whether early 2026 or slightly before 2027, will be largely shaped by miner economics, fee trends, and the precise moment when deep-pocketed buyers aggressively move to secure supply.
Mapping the Potential Downturn: Bitcoin Bear-Market Scenarios
Regardless of what optimistic influencers might claim, Bitcoin continues to trade in identifiable cycles. The upcoming downcycle is highly likely to be influenced by the mathematics of the security budget, the evolving behavior of miners, and the elasticity of institutional capital flows. Here are three potential outcomes:
- Base Case: $49,000 (Q1–Q2 2026): Projects a bottom following two to three sharp price legs lower, leading to consolidation. Triggered by hashprice forwards below $40 PH/s/day for weeks, fee percentage of miner revenue below 10%, and cumulative 20-day ETF flows turning negative. Recovery begins with miner capitulation and ETF flows turning positive below $50,000.
- Soft-Landing: $56,000–$60,000 (H2 2025): A shallower decline characterized by a single rapid flush and subsequent range-bound trading. More likely if fee percentage sustains above 15%, hashrate remains stable, and ETF flows show mixed to positive trends on down days. Recovery fueled by rising Layer 2 settlement fees, a resurgence in inscriptions, and consistent ETF net purchases.
- Deep Cut: $36,000–$42,000 (Late 2026–Q1 2027): A more severe, waterfall-like decline. Key triggers include broader macro risk-off sentiment, prolonged fee drought, significant miner distress, and persistent ETF outflows. Recovery would hinge on a major policy/liquidity pivot or large strategic purchases by sovereign entities or ETFs. Note that a strong liquidity level around $36,700, often shown by a green solid line on charts, could offer substantial support even in this scenario.
Key Indicators: ETF Flows, Miner Revenue, and Hashprice
The depth of our descent will be heavily dictated by ETF flows and miner revenue. A striking example of "flow elasticity" in the new regime occurred on November 19, 2025, when BlackRock’s IBIT recorded a record one-day outflow of approximately $523 million as the spot price began to roll over. Rolling sums across all U.S. spot ETFs confirm this, with net outflows accelerating as prices decline.
Regarding miner revenue, the robust fee floor that briefly materialized during the inscriptions boom has now largely receded. Last year's Ordinals activity temporarily boosted fee revenue, but transaction demand has since cooled, and fee contributions have significantly retreated from their 2024 peaks, as highlighted by Bitcoin Magazine’s data. Median fee rates in the mempool are also well below last year's highs. A weak fee share means the security budget remains overly reliant on issuance, which steadily decreases, shifting the burden to price and hashprice to maintain miner profitability.
Furthermore, miner behavior is evolving. Publicly traded mining operations are increasingly expanding into AI and HPC hosting. While these dual revenue streams stabilize their business models, they also introduce a critical element: hashrate becomes more elastic when Bitcoin prices are low. If hosting cash flow covers fixed costs, miners can strategically reduce their active hashrate when BTC margins tighten without immediate financial distress. This reduces network security at the margins during dips and can amplify price sensitivity, contributing to sharper declines.
Hashprice remains the most straightforward metric for assessing miner margins. Luxor’s Hashrate Index shows both spot and forward series hovering near their lower bands into late 2025, signaling tightening conditions. If forward hashprice persists at depressed levels while fee share stays subdued, the likelihood of miner balance sheet stress increases, potentially leading to concentrated periods of "capitulation-style" supply.
The Road to Recovery and Crucial "Flip-Levels"
The pathway from a capitulation event typically involves two or three rapid legs lower, a period of basing, and then an accumulation phase. During this phase, miner and leveraged supply is absorbed as perpetual funding rates and basis reset. My $49,000 base case is fundamentally a cyclical prediction, not a broad macro forecast, and its timing aligns with the observation that bear markets are indeed shortening. The pre-halving all-time high in 2024 compressed the cycle's cadence compared to 2020-21, but it did not eliminate cycles altogether.
To predict the path forward, we need to closely monitor the confluence of three key indicators:
- Fee share of miner revenue (7-day basis): Watch if it consistently fails to sustain above 10-15% for multiple weeks.
- Hashprice (USD/TH/day): Look for new cycle lows that persist long enough to exert pressure on weaker mining operators.
- 20-day cumulative ETF flows: Observe if they turn negative as the price declines, signaling a breakdown in flow elasticity at the margin.
When these three factors align, the probability of a sharp price correction significantly increases. The recovery side of this thesis is underpinned by robust infrastructure. ETFs, dedicated custody solutions, and over-the-counter (OTC) rails can now handle substantial volumes with fewer frictions than in prior cycles. This efficiency helps translate headline "dip demand" into actual, executed trades. The anticipated buyer list at the $49,000 level includes ETFs rebalancing, UHNW mandates adding core exposure, and sovereign or quasi-sovereign balance sheets that view prices below $50,000 as strategic. A price-elastic response from these channels is what will distinguish a drawn-out malaise from a swifter climb back towards expanded realized capitalization and healthier market breadth.
Considering Counterpoints and Nuances
It’s important to acknowledge alternative perspectives. Layer 2 settlement solutions could potentially establish a more durable fee floor, bolstering the security budget and alleviating hashprice stress. If fee share were to rise and consistently hold above the mid-teens, and if ETF flows turned positive on down days, the bear market could indeed resolve earlier and at a shallower depth. The pivot by miners into AI and HPC hosting can also be framed as a supportive development for network security in the medium term, helping keep miners solvent and able to invest. However, this must be weighed against the immediate effect of elastic hashrate during price lows, precisely when sharp prints typically occur.
The Power-law framework further reinforces the cyclical lens. On a logarithmic scale, Bitcoin’s long-term trajectory behaves much like an organic system operating within resource constraints. Deviations above and below this trend occur when security budget variables and capital flow variables exert pressure in the same direction. The current setup appears to present a classic risk for a "below-band" excursion if transaction fees remain soft and institutional flow elasticity shows signs of weakening.
Ultimately, if these conditions persist, a $49,000 print in early 2026 aligns logically with Bitcoin's cyclical nature, evolving mining economics, and efficient market infrastructure. Should fees rebuild and institutional flows stabilize sooner, the ultimate low could set higher. The prudent approach remains to simultaneously observe fee share, hashprice, and ETF flows, allowing the market's own actions to dictate the path forward.
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