Reconstruction of Macro Narratives: The Failure and Doubts Surrounding the Four-Year Cycle

In the analytical framework for cryptocurrency assets, the 'four-year cycle' theory based on Bitcoin's halving mechanism has long occupied a dominant position.

This theory, grounded in marginal changes in supply and demand, posits that Bitcoin's price behavior exhibits a highly cyclical rhythm: a year after the halving, a frenzied bull market emerges, followed by a year-long bear market correction, and finally two years of consolidation and recovery. If strictly adhering to this historical script — an analysis akin to 'marking the boat to retrieve the sword' — the current market phase is indeed deeply unsettling.

Reviewing historical data, the tops of the bull markets in 2013, 2017, and 2021 were often followed by approximately 12 months of unilateral declines, with maximum drawdowns typically exceeding 80%.

• 2014-2015 Bear Market: Price fell from $1,100 to below $200, a decline of about 85%, lasting approximately 400 days.

• 2018 Bear Market: Price dropped from $19,000 to $3,100, a decline of about 84%, lasting approximately 365 days.

• The 2022 bear market: Prices fell from $69,000 to $15,500, a decline of approximately 77%, over a period of about 376 days.

As of February 2026, the price of Bitcoin has retreated to around $60,000 from its peak of approximately $126,000 in October 2025, representing a decline of about 52%.

Kaiko Research astutely pointed out that the current 52% retracement appears 'abnormally shallow' compared to historical cycles. If strictly benchmarked against the intensity of past bear markets, typical bottoms are often accompanied by drawdowns of 60% to 68% or even deeper, implying that prices theoretically still have room to fall further to $40,000 or lower.

Moreover, from a temporal perspective, only four months have passed since the October 2025 peak. According to the rule of thumb that 'bear markets last one year,' the market may still need to 'grind' at the bottom for another 4 to 8 months until the second half of 2026.

However, this simplistic linear extrapolation may not apply to the current cycle.

This cycle (2024-2026) demonstrates significant structural heterogeneity, primarily reflected in two dimensions:

• Institutional anchor points introduced by ETFs: The approval of U.S. spot Bitcoin ETFs not only brought incremental capital but, more importantly, altered the structure of holders. Institutional funds (such as Blackrock’s IBIT and Fidelity’s FBTC holdings) possess greater risk tolerance and longer investment horizons compared to retail investors. Data shows that even when prices fell below the average cost basis of ETFs (approximately $60,000-$64,000), ETFs did not experience catastrophic net outflows but instead demonstrated a 'buy-the-dip' allocation characteristic. This institutional 'backstop' effect may have significantly raised the market's pain threshold, making it difficult for prices to repeat collapses of over 80%.

• Shift in macro factor dominance: As Bitcoin’s market capitalization surpasses the trillion-dollar mark, its asset characteristics have evolved from being a purely 'alternative speculative asset' to a 'macro-sensitive sentiment asset.' The correlation between Bitcoin, the Nasdaq index, gold, and the 10-year U.S. Treasury yield reached historical highs in 2025-2026. This indicates that Bitcoin price fluctuations are no longer solely driven by endogenous supply shocks like halving events but are increasingly constrained by the global liquidity dynamics controlled by the U.S. dollar.

Therefore, determining 'where the bottom is' cannot rely solely on the calendar (time cycles) or a ruler (retracement magnitude); it is necessary to deeply deconstruct the macro variables currently driving price behavior.

The 'Volker Shock': The Shadow of the Fed's Policy Pivot and Liquidity Tightening

The sharp adjustment in Bitcoin and the broader cryptocurrency market in early 2026 did not stem from an endogenous decline in blockchain technology but rather from a sudden change in the macro-financial environment—referred to as 'The Warsh Shock' in market parlance.

On January 30, 2026, former Federal Reserve Governor Kevin Warsh was nominated as the new Federal Reserve Chair, succeeding the outgoing Jerome Powell. This personnel change triggered significant volatility in financial markets. Warsh has long been known as an 'inflation hawk' and a critic of quantitative easing (QE). His policy inclinations, revealed during his confirmation hearing and past statements—referred to as the 'Warsh Doctrine'—advocate an aggressive 'monetary barbell strategy':

• Short-term interest rate: May remain neutral or slightly accommodative to support real economic growth.

• Balance Sheet Side: Advocates aggressive quantitative tightening (QT), accelerating the reduction of the Federal Reserve's $6.6 trillion balance sheet to restore the central bank's policy space and financial discipline.

This policy mix is expected to have directly led to a surge in long-term government bond yields. The yield on the 10-year U.S. Treasury note rapidly surpassed the key psychological threshold of 4.5% in early February, triggering a revaluation across asset classes. For Bitcoin, an asset highly sensitive to liquidity, the spike in risk-free yields and central bank balance sheet reduction implies the exhaustion of marginal buying and the withdrawal of existing capital.

Additionally, at the January 2026 FOMC meeting, the Federal Reserve decided to maintain the federal funds rate within the target range of 3.50%-3.75%, pausing the previous rate-cutting trajectory. Although markets still anticipate some degree of rate cuts in 2026, the specter of 'Higher for Longer' has once again overshadowed the market. Analysis from institutions like JPMorgan and Blackrock points out that overly dovish expectations have been revised in the context of inflation not yet fully returning to the 2% target and a still-strong labor market.

This macroeconomic backdrop provides critical clues for assessing Bitcoin's bottom: the 'market bottom' of this cycle is highly likely to coincide with the 'liquidity bottom.' Before the Federal Reserve halts balance sheet reduction or explicitly signals an easing of liquidity, it will be difficult for Bitcoin to embark on a new unilateral bull market; instead, it will mostly exhibit wide-ranging fluctuations within the bottom range.

Miner Economics: The Hardcore Logic of Physical Bottom and the Shutdown Price Defense Line

Within Bitcoin's valuation framework, miners are not only the maintainers of the network but also the 'last line of defense' for prices.

The production costs of miners (especially electricity costs and hardware depreciation) form Bitcoin's 'physical bottom.' When the price falls below the shutdown price of mainstream mining machines, high-cost miners will be forced to halt operations, leading to a decline in the network's total hash rate. This triggers a difficulty adjustment, ultimately reducing the per-unit cost for remaining miners and establishing a self-regulating price mechanism.

This process is referred to as 'Miner Capitulation,' which historically has often been one of the most precise signals of cyclical bottoms.

Hash Rate Purge: The Largest Retreat and Difficulty Adjustment Since 2021

In February 2026, the Bitcoin network underwent a historically significant stress test. Data shows that the network’s mining difficulty plummeted by approximately 11.16% during one adjustment cycle. This marked the largest single negative adjustment since China’s comprehensive ban on Bitcoin mining in 2021.

Behind this sharp difficulty adjustment lies a significant pullback in total network hash power. Hash power declined by about 20% from its peak in October 2025 (exceeding 1.1 ZettaHashes/s) to around 863 ExaHashes/s. The causes of this 'great retreat' were twofold:

• Economic pressure from price collapse: The price halved in a short period (from $126,000 to $60,000), directly breaching the break-even points of numerous mid-to-low-end mining rigs and high-electricity-cost mining farms.

• Physical shocks from force majeure: The winter storm codenamed 'Fern' swept across North America, causing power supply shortages in mining-heavy regions such as Texas. In response to the grid's curtailment plans or due to skyrocketing electricity costs, a large number of mining facilities were forced to physically shut down.

Although this hash rate washout appears bearish on the surface, it lays the foundation for the formation of a market bottom. Historically, deep retractions in hash rate and adjustments in mining difficulty often signal the exhaustion of selling pressure. Once the most vulnerable miners exit, what remains are long-term participants with excellent cost control and strong financial resources, forming the most solid group of holders at the bottom.

Shutdown Price Map: The Critical Line Between $52,000 and $58,000

To accurately estimate the specific level of the bottom, we need to conduct an in-depth analysis of the shutdown prices of current mainstream mining machines. Based on the current network-wide difficulty (approximately 125.86 T) and typical industrial electricity costs ($0.06/kWh to $0.08/kWh), we can create a 'survival map' for miners.

The Twilight of the S19 Series: $75,000-$85,000

The Antminer S19 series (including the S19j Pro, S19 XP, etc.) was once the absolute mainstay of the previous cycle, but its energy efficiency has gradually fallen behind after the 2024 halving.

• At an electricity cost of $0.08/kWh, the shutdown price for the standard S19 version and some Pro models is as high as $85,000 or more.

Even for the more energy-efficient S19 XP, the shutdown price hovers around $75,000.

• Conclusion: At the current market price of approximately $67,000, the vast majority of miners relying on the S19 series without a competitive electricity cost advantage are already in a severe 'underwater' state (operating at a loss). This is the primary source of the recent decline in hash rate, indicating that the selling pressure from this marginal hash rate has been largely exhausted.

The Battle for the S21 Series: $69,000-$74,000

The Antminer S21 series represents the backbone of the current network's computing power and reflects the mainstream energy efficiency standards at present.

• Data shows that the shutdown price range for the S21 series at an electricity cost of $0.08/kWh is approximately $69,000 to $74,000.

• This data point is critical. The current Bitcoin price (approximately $67,000) has already breached this range. This indicates that even miners with newer equipment but slightly higher electricity costs are beginning to face decisions to shut down. When mainstream mining machines start shutting down, the market is typically extremely close to its bottom.

Ultimate Physical Bottom: $44,000 (S23/U3S23H)

Bitmain’s latest S23 series and U3S23H represent the pinnacle of current human engineering in terms of energy efficiency.

• The shutdown price for these models is as low as approximately $44,000.

• This forms the 'extreme physical hard bottom' of the current bear market. Unless there is a global financial system collapse or a catastrophic event at the Bitcoin protocol level, it will be extremely difficult for prices to fall below this level, as it would imply that nearly all computing power on the network would incur losses, leading to a potential reconfiguration of network security.

Comprehensive analysis: The range of $52,000 to $58,000 is not only a support level based on technical analysis but also the 'Maginot Line' of miner economics. If the price falls to this range, it will force the S21 series into large-scale shutdowns (even for miners with low electricity costs), triggering deeper capitulation in computing power and a reduction in mining difficulty. Historically, such deep miner capitulation often marks the absolute bottom of the cycle.

On-Chain Token Distribution: Who Is Panicking, and Who Is Greedy?

If miners define the physical lower limit of the bottom, then the distribution and flow of on-chain tokens reveal the psychological game at the bottom. On-chain data provides us with a 'God's-eye view' into the behavior of market participants (short-term speculators versus long-term believers). The current on-chain status exhibits typical characteristics of 'capitulation and transfer,' a necessary phase in the formation of a bottom, although it has yet to be fully completed.

The Collapse and Capitulation of Short-Term Holders (STH)

The sharp price decline in early February 2026 essentially represented a 'washout' targeting Short-Term Holders (STH). STH refers to addresses holding coins for less than 155 days, typically regarded as the least resolute segment of the market and most sensitive to price fluctuations — namely, retail investors or trend followers.

On-chain data shows that as Bitcoin fell below $70,000 and slid toward $60,000, it triggered panic selling among STHs. On February 6 alone, more than 100,000 Bitcoins belonging to STHs were transferred to exchanges. This massive inflow into exchanges is a classic signal of capitulation, indicating that a large number of positions acquired at peak prices in late 2025 are being liquidated at a loss.

A more critical metric is the STH Realized Price, which represents the average cost basis of short-term holders.

• STH realized price: approximately $92,337.

• Current Market Price: Approximately $67,000.

This is a staggering figure, implying that short-term holders as a whole are facing an average unrealized loss of nearly 30%. Historical patterns suggest that the true bottom of a bear market typically occurs when STHs reach complete despair and all losing positions are washed out. At this point, the STH Realized Price will rapidly decline, potentially crossing below the Long-Term Holder (LTH) Realized Price—a 'death cross,' indicating that newcomers have lower costs than long-term holders, signaling extreme market undervaluation.

Currently, while STHs are incurring losses, there remains a gap before their cost basis significantly declines and crosses with that of LTHs. This suggests that the market may still need to undergo a period of 'grinding bottom,' during which extended low-price consolidation will gradually erode high-cost positions, thereby lowering the average cost for STHs.

Position Trading and Accumulation by Long-Term Holders (LTH)

In stark contrast to the panicking retail investors, Long-Term Holders (LTH), defined as those holding Bitcoin for over 155 days, are beginning to show signs of reaccumulation. The Alpha Report from Bitfinex points out that after a prolonged distribution phase (profit-taking) during the top of the bull market in the second half of 2025, the holdings of LTHs bottomed out in December 2025 and have since started to recover, currently amounting to approximately 14.3 million BTC.

• LTH Realized Price: approximately $40,311.

• Overall Realized Price: approximately $55,207.

The overall realized price (around $55,200) represents another crucial line of defense. It signifies the average price at which all coins on the Bitcoin network were last moved, or in other words, the average cost basis for the entire market. During deep bear markets, spot prices often briefly fall below the overall realized price, creating a sense of extreme despair (indicating that the entire market is losing money on average), before completing a V-shaped reversal. The current price (approximately $67,000) is only about 18% away from this line of defense, further validating the high risk-reward ratio of the $50,000-$58,000 range.

Divergence and Convergence Between Whale Behavior and ETF Flows

It is noteworthy that the behavioral patterns of institutional capital are undergoing subtle changes. Although there was a brief period of net outflows from ETFs in early 2026, exacerbating market selling pressure, fund flows reversed when prices approached the $60,000 level.

Data from February 10 showed that U.S. spot Bitcoin ETFs recorded $166 million in net inflows, with Blackrock's IBIT accumulating positions against the market downturn. This "buying on dips" behavior by institutions starkly contrasts with retail panic selling. This indicates that for institutionally allocated funds focused on asset allocation, $60,000 has entered their value investment range.

Technical Analysis: From 'Super Turnover Zone' to 'Psychological Level'

Setting aside fundamentals and on-chain data, the bottom signals are equally clear and strong when considering only price action and technical indicators.

The 'Super Turnover Zone' from a VPVR Perspective

The Visible Range Volume Profile (VPVR) serves as an X-ray machine for identifying support and resistance levels. It clearly outlines the structure of positions during the bull market period between 2024 and 2025. VPVR shows that the wide range between $72,000 and $52,000 represents the 'super turnover zone' over the past two years, encompassing a massive volume of historical trading activity.

• $70,000 - $72,000 (Overhead Resistance): The previous strong support level has now transformed into a significant resistance level after being breached. A large number of positions purchased within this range (including some ETF buying) are currently underwater, and any rebound to this level will face selling pressure from investors seeking to break even. This is also why recent rebounds have repeatedly been obstructed around the $71,000 mark.

• $52,000 - $58,000 (Iron Bottom Below): This represents the lower boundary of the turnover zone and is also the area with the densest 'High Volume Nodes (HVN)' as shown by VPVR. Within this range, there is not only a substantial accumulation of historical trading volume but also an overlap with the chip structure from the previous bull market (2021). This is the last bastion for the bulls; if it breaks down, the price will enter a 'vacuum zone' with sparse trading volume and could rapidly slide to $40,000.

200-Week Moving Average: The Battle to Defend the Bull-Bear Demarcation Line

The 200-week moving average (200-Week Moving Average, 200WMA) is the most reliable and respected long-term bottom indicator in Bitcoin's history. It represents the average holding cost over the past four years and is generally regarded as the dividing line between bull and bear markets.

Currently, the 200-week moving average is approximately trending upward near $58,000.

• Historical Backtesting: During the bear market bottoms in 2015 and 2018, Bitcoin prices stabilized and rebounded after touching or slightly breaking below the 200-week moving average. Although the 2022 bear market once broke below this moving average, the subsequent V-shaped reversal again demonstrated its effectiveness as a 'value anchor'.

• Current Status: As of February 2026, the Bitcoin price is testing this critical moving average downward. If the price can effectively hold above the $58,000 level, it will highly likely confirm a cyclical bottom. This technical indicator, along with the miner shutdown price (S19 series) and the realized price of the entire network ($55k), forms a perfect triple resonance within the $52k-$58k range.

Sentiment Indicators: Contrarian Opportunities Amid Extreme Fear

• Fear and Greed Index: This index has recently fallen to the 'Extreme Fear' range of 5-11. This is the lowest level since the FTX collapse in 2022. Buffett’s famous saying, 'Be greedy when others are fearful,' holds significant statistical reference value at this moment. Historical data shows that when this index remains in single digits for an extended period (more than a few weeks), it often presents the best buying opportunity for long-term capital.

• Social Media Sentiment: Discussion volume and sentiment on social platforms (Twitter/X, Reddit) exhibit 'deathly silence' or extreme pessimism. The so-called 'death cross' appears not only on the K-line but also in public opinion. This state of low volatility, where retail investors have completely exited and no one is paying attention, is a necessary psychological condition for forming a bottom.

Stablecoins and Liquidity: The Overlooked Reservoir

While analyzing the price decline, we cannot overlook the market's latent purchasing power – stablecoins. The market capitalization of stablecoins serves as a core indicator of the 'dry powder' available in the cryptocurrency market.

Despite the significant pullback in Bitcoin prices, the total market capitalization of stablecoins has not experienced a collapse-style outflow akin to that seen in 2022. Instead, it has remained near a historical high of $311 billion. This indicates that funds have not truly exited the crypto ecosystem but have retreated from highly volatile Bitcoin/altcoins to remain on-chain in the form of safe-haven assets like USDT/USDC.

• USDT vs. USDC: Notably, USDC’s growth rate has exceeded that of USDT for the second consecutive year, with its share in DeFi and institutional settlements continually increasing. This reflects a stronger willingness among compliant and institutional funds to enter the space, where they are waiting on-chain for clarity in the macroeconomic environment.

• Poised for Action: The elevated market capitalization of stablecoins acts like a massive 'reservoir.' Once the market trend reverses (such as when the Federal Reserve halts quantitative tightening or prices break through key resistance levels), this purchasing power of over $300 billion will quickly transform into fuel driving price increases. Therefore, closely monitoring changes in the market capitalization of stablecoins, especially large issuances of USDC, will be an important signal for capturing right-side trading opportunities.

Conclusion and Strategy:

Where is the Bottom? — A Triple Verification Model

Based on the above macro, mining, on-chain, and technical analyses, we can construct a multi-dimensional bottom verification model that concretizes the vague concept of a 'bottom' into three specific ranges:

• Physical Bottom ($44,000 - $52,000):

Definition: This represents the shutdown price defense line for the latest generation of high-energy-efficiency mining machines such as S23, as well as the theoretical target level for historical extreme drawdowns (60%-70%).

Probability: Low (<20%). Unless a systemic financial collapse occurs (e.g., a liquidity crisis triggered by the Federal Reserve's aggressive balance sheet reduction), the likelihood of reaching this zone is minimal, categorized as an "extreme bargain area."

• Value Bottom (52,000 - 58,000 USD):

Definition: This is the overlapping region of the 200-week moving average, the network-wide realized price, and the shutdown price for S19/S21 miner models. It also represents the lower boundary of the super-concentration zone indicated by VPVR.

Probability: Very High (>60%). This zone exhibits strong support and is likely to be a defensive line for major capital allocation. The market may briefly touch this level through "wicks," but it is unlikely to remain below it for an extended period.

• Sentiment Bottom (60,000 - 65,000 USD):

Definition: This is the "vanguard" currently being tested by the market and represents a psychological threshold. Although signs of panic and ETF fund inflows have emerged, considering that short-term holder (STH) costs have not yet undergone deep liquidation, this level may require repeated volatility to wash out, or even face the risk of a "false breakdown" to lure bears.

Response Strategy: Pyramid Positioning Method

Given that the bottom is a range rather than a single point and macro uncertainties (Federal Reserve policies) persist, investors are advised to abandon the gambler's mindset of "all-in" bottom fishing. Instead, adopt the pyramid positioning method to accumulate positions in batches, thereby smoothing costs and managing risks:

• First Tier (60k-65k): Establish an initial position (approximately 20%-30% of total allocation). Although this level appears precarious, it has entered a high reward-to-risk ratio zone, making it suitable for long-term allocation to avoid missing out on potential gains.

• Second Tier (52k-58k): Core accumulation zone (approximately 40%-50% of total allocation). Once prices reach the 200-week moving average or the shutdown price range for major mining operations, decisively increase allocations. This represents the most cost-effective entry point in the current cycle.

• Third-tier (44k-52k): Extreme defense zone (reserve 20%-30% liquidity). This is used to address potential 'black swan' events, such as a liquidity crunch caused by macroeconomic deterioration. If the market does not fall to this level, these funds can be used for chasing upward trends after confirmation of a right-side trend.

Signals indicating a bottom on the right side:

In addition to left-side limit orders, investors should also closely monitor the emergence of the following right-side signals:

• Increased volume with long lower shadows at the daily chart level: This indicates that bearish forces are exhausted and bullish forces are strongly counterattacking at key positions.

• Short-term holder realized price crossing below long-term holder realized price: Or when they become extremely close, marking complete turnover of positions and completion of bottom formation.

• Significant recovery in stablecoin market capitalization: Particularly the issuance of USDC, representing the revival of institutional buying power.

• Softening stance from the Federal Reserve: Any indication of stopping balance sheet reduction or slowing down interest rate hikes will be the starting gun for liquidity.

Cycles may be delayed, but they never fail to arrive. For steadfast believers, the crypto winter might be a gift bestowed by the market before the next cycle begins.

Editor/joryn