Traditional halving cycle loses predictive power
Bitcoin’s traditional four-year halving cycle, once a cornerstone for crypto market participants, is losing its predictive power as institutional forces reshape trading dynamics. Political announcements and fiscal policy signals are now influencing market movements more significantly than internal economic indicators like halving events. While stock markets experienced an upturn in 2025, Bitcoin’s performance fell short, indicating that market dynamics rely more on liquidity expectations and policy timing.
Under the conventional four-year framework, early 2026 should mark a late-cycle or post-peak period for Bitcoin prices. However, current price trends indicate that investors are postponing this shift, with policy cues taking precedence over the halving-driven cycle entirely. The last halving in April 2024 saw Bitcoin rise from $60,000 to $126,000, a smaller jump than previous cycles. This suggests that as more Bitcoin circulates and institutional capital grows, the impact of halvings on supply becomes less relevant overall.
Fiscal stimulus and regulatory clarity drive liquidity expectations
Government spending and central bank policies now serve as primary liquidity barometers for Bitcoin traders rather than on-chain metrics. The combination of pre-election fiscal stimulus and unclear monetary policy boundaries is creating an environment characterised as « financial repression » by Binance’s 2026 report. Trump administration tariffs and public urging of Federal Reserve Chair Jerome Powell to reduce rates have blurred distinctions between fiscal, trade and monetary policies. Significant government expenditure and policy-induced low interest rates are diminishing the allure of bonds and bank credit, leading investors toward cryptocurrency alternatives.
The US government is pushing forward with multi-trillion-dollar spending initiatives in anticipation of the 2026 midterm elections this November. Growing public debt appears to limit the Federal Reserve’s options, raising the likelihood of quasi-quantitative easing through administrative means rather than traditional tools. The Federal Reserve’s interest rate adjustments and China’s liquidity measures are altering the global financing environment, impacting asset performance significantly.
Legislative developments and ETF flows replace halving signals
Policy developments are expected to significantly influence Bitcoin’s trajectory in 2026, aligning with sustained patterns of institutional demand rather than cyclical patterns. The CLARITY Act, which passed the House in 2025, aims to delineate oversight between the CFTC and SEC for crypto products. If enacted before the 2026 midterm elections, it would clarify market structure for spot and derivatives trading, custody and exchanges accelerating capital formation. The crypto industry lobby possesses over $100 million, and with midterm elections approaching, US lawmakers have strong incentives to finalise beneficial legislation.
The introduction of Bitcoin ETFs has fundamentally changed demand dynamics, with capital flows now influenced by broader financial market mechanisms. US policy under the Trump administration has dismantled barriers, enabling banks to engage in crypto activities after the Federal Reserve withdrew restrictive guidance. This pro-innovation stance has rippled globally, expediting rulebooks in jurisdictions from the UK to Asia with focus on stablecoins and tokenisation. As Bitcoin integrates more deeply with traditional financial systems, the halving remains significant but is now part of a complex interplay.
