Wintermute: The traditional four-year cycle is shattered; the three major Bitcoin revival conditions are exposed

Wintermute reports indicate that the four-year cycle is outdated, with altcoins rising from 60 days to 20 days. The 2026 recovery depends on one of three major conditions: ETF expansion, major assets generating wealth effects, or retail investors shifting back from AI/stocks. Clear Street believes that the Federal Reserve cutting interest rates is key, expecting two rate cuts this year.

Structural Evidence of the Breakdown of the Traditional Four-Year Cycle

(Source: Wintermute)

2025 disappointed many cryptocurrency investors, as Bitcoin’s traditional four-year cycle did not continue, with more moderate gains that did not extend to the broader crypto market. Wintermute pointed out in its digital asset OTC trading market report that the market has long exhibited a “cyclical” pattern, with Bitcoin and Ethereum inflows driving continued, narrative-driven rallies in altcoins, but this pattern collapsed in 2025.

Instead, liquidity concentrated in a few large-cap stocks, mainly driven by ETF and institutional inflows. As a result, market breadth narrowed, performance divergence increased, indicating capital became more selective rather than rotating broadly across the market. The launch of US spot Bitcoin ETFs has tilted the digital asset market toward institutional investors, and this structural shift makes retail-driven altcoin rallies difficult to replicate.

Wintermute states: “Data from 2025 shows that the traditional four-year cycle is becoming obsolete. Market breadth has significantly narrowed, with altcoin rallies lasting about 20 days on average, down from approximately 60 days in the same period last year. Only a few tokens performed well, while overall market continued to decline due to token unlock delays.” This shortening of the rally window from 60 days to 20 days means that speculative opportunities in altcoins are greatly compressed, with faster capital rotation but weaker sustainability.

(Source: Wintermute)

Debates over whether Bitcoin’s four-year cycle is weakening or fundamentally changing continue, but Wintermute believes the outlook for 2026 is far less predictable. This shift reflects structural changes rather than temporary stagnation; the entry of institutional capital has altered the market’s microstructure. As ETFs become the main source of funds, Bitcoin’s price discovery mechanism shifts from retail sentiment-driven to institutional allocation logic, reducing volatility but also causing the correlation among altcoins to diminish.

Three Major Structural Evidence of the Breakdown of the Four-Year Cycle

Altcoin rally window shortening: collapsing from 60 days to 20 days, with persistent capital rotation breakdown

Market breadth narrowing: only a few tokens perform well, overall market continues to decline

Liquidity concentration: funds focus on BTC/ETH large-cap stocks, no longer broadly rotating into altcoins

Data from Wintermute shows that the market structure in 2025 is completely different from the bull markets of 2017 and 2021. In past bull markets, Bitcoin’s rise would sequentially trigger Ethereum, large-cap altcoins, and small-cap altcoins to rally—a “bull market trilogy” that is a core feature of the four-year cycle. But in 2025, this rotation mechanism failed, with funds remaining in Bitcoin and not effectively transmitting to the altcoin market.

Three Conditions for the 2026 Recovery and Their Probabilities

Wintermute states that for the situation in 2026 to improve, at least one of the following three conditions must occur. The first is ETF and digital asset management firms expanding their investment scope beyond Bitcoin and Ethereum. Currently, the US has only approved spot ETFs for Bitcoin and Ethereum. If the SEC approves ETFs for other major coins like Solana, XRP, etc., it could bring institutional-level capital into the altcoin market, potentially reigniting altcoin rallies.

The second condition is that major assets achieve strong performance again, generating broader wealth effects. If Bitcoin breaks its all-time high and continues rising to $150,000 or higher, early holders’ massive profits could flow back into altcoins seeking higher returns. This wealth effect was a key driver of altcoin explosions in the 2017 and 2021 bull markets.

The third condition is retail investors refocusing on cryptocurrencies rather than AI, stocks, and commodities. Re-engaging retail investors in crypto is not easy. Institutional investors have played an increasingly important role in driving Bitcoin prices higher, and the painful memories of the 2022–2023 bear market—marked by huge losses, notable bankruptcies, and forced liquidations—are still fresh.

In 2025, Bitcoin and Ethereum underperformed compared to traditional stock markets, especially in high-growth sectors like space, AI, robotics, and quantum computing. This relative underperformance further weakened the appeal of cryptocurrencies for individual investors seeking excess returns. Retail investors remain active but are increasingly adopting dollar-cost averaging into the S&P 500 and reallocating funds into other high-growth themes.

The Federal Reserve Rate Cuts as the Only Confirmed Catalyst for 2026

Some industry observers believe that retail re-entry into crypto depends less on sentiment and more on macroeconomic conditions. Clear Street’s Managing Director Owen Lau states that market participation may be related to the Fed’s aggressive rate cuts, which would create cheaper capital environments and larger risk appetite. Lau says that Fed rate cuts are “one of the key catalysts for the crypto space in 2026.”

According to CME Group’s FedWatch tool, the market currently expects about two rate cuts this year. If the Fed indeed cuts rates as expected, it could have multiple positive effects on the crypto market. First, lowering financing costs, with reduced rates on leverage trading and staking loans, encouraging investors to increase positions. Second, boosting risk appetite, as low interest rates make investors more willing to allocate to high-risk assets for higher returns. Third, weakening the dollar, since rate cuts often lead to dollar depreciation, benefiting Bitcoin as a hedge against the dollar.

However, rate cuts are not guaranteed. If US inflation rebounds or economic growth exceeds expectations in 2026, the Fed might maintain high rates or hike again. This macroeconomic uncertainty adds volatility to the crypto outlook. Moreover, even if rate cuts occur, whether capital flows into crypto remains uncertain. If equities and bonds perform better in a rate-cut environment, funds may prioritize these traditional assets.

Wintermute’s report reveals a harsh reality: the crypto market has shifted from an “independent bull market” to a “macro asset class.” In the past, crypto could decouple from equities, driven by its own narratives and technological breakthroughs. But in the new era dominated by institutions, the crypto market increasingly resembles high-beta tech stocks, influenced by macro liquidity and risk appetite. This shift means that the 2026 recovery will no longer depend on “Bitcoin halving” or “Ethereum upgrades,” but on Fed policies, ETF product innovations, and relative attractiveness compared to traditional assets.