A Shortened Cycle: Bitcoin Rewrites the Playbook

Technical resistance is key to algorithmic trading today. Reaching such a level can trigger automatic orders on exchanges. The recent decisive break above this level triggered widespread panic among investors who had bet on a decline in the price of Bitcoin.

Breaking through the level meant capitulation for short sellers, as they were forced to close out their positions. Closing a short position means the investor must buy the financial asset to prevent further losses. This mechanical buying then drives the asset’s price even higher. In stock market slang, this phenomenon is called a short squeeze.

The Halving Cycle Faces a Major Test

This is only part of the story behind the rise in Bitcoin and other cryptocurrencies. Another piece of the puzzle is understanding why so much of the market was expecting a Bitcoin decline and betting on it.

The explanation can be found in the theory of halving cycles. Bitcoin is still a relatively young financial asset whose behavior has not been fully tested across conventional macroeconomic conditions. That does not mean we lack sufficient data to identify other cycles in Bitcoin.

The best known of these are the aforementioned halving cycles, which track Bitcoin’s behavior in regular four-year periods. Their rhythm is set by the halving – the moment when the reward miners receive for mining a block is cut in half. Very broadly speaking, Bitcoin has always experienced one leaner year followed by three more prosperous ones.

According to this theory, we are now in the final phase of a bear cycle. Bitcoin should see a major turnaround this fall – that is, a reversal of the long-term trend. Investors constantly study historical charts, and so far this halving cycle has played out almost exactly as expected.

However, based on previous cycles, a final drop was expected before the trend reversed. That decline was supposed to come in the summer. When it failed to materialize, the likelihood grew that it would occur between mid-August and the end of September. As time went on, more and more investors succumbed to the temptation to bet against Bitcoin. So far, however, the expected decline has not materialized.

Those waiting for the final crash had one strong argument up their sleeve. If another crash does not occur and Bitcoin returns to a bullish trend by the end of September, it would mean that the bottom of this cycle was reached as early as 1 July.

Only 268 days would then have elapsed between the all-time high on 6 October 2025 and the bottom. That would make for a historically short bear market.

In the previous three major cycles, Bitcoin found its definitive bottom 364 to 406 days after reaching its peaks. The current bear market would thus end nearly 100 days earlier than we have come to expect from previous cycles, significantly rewriting the current understanding of halving cycles.

US Debt Brings Bitcoin Back into the Game

Consider the catalyst for this rally: the rise in US Treasury yields and the subsequent intervention by the Treasury. Without delving into technical details, the basic point is this: rising yields on long-term bonds are a signal from the bond market that investors are concerned about whether the US will be able to meet its obligations over the long term.

This structural debt provides a major argument for those who warn of the dangers of current fiat currencies. The subsequent reaction by the Treasury – which announced that it would double the volume of buybacks of long-term US bonds – therefore had exactly the opposite effect.

Yields initially fell and the dollar weakened. The market partially interpreted this move as another attempt by the government to mitigate the consequences of high debt by injecting liquidity into the bond market. And this is precisely where Bitcoin comes back into play.

If the answer to the problem of excessive debt is, once again, more liquidity, then the argument of Bitcoin advocates – that it serves as a hedge against the devaluation of fiat currencies – gains traction. Gold’s rise alongside Bitcoin also reflected fears of currency devaluation.

Trading Volumes Will Determine the Next Bull Run

All of this looks very positive for Bitcoin. But one big question remains: what will happen once the forced buying by short sellers subsides? Trading volume has risen significantly during the current rally. The decisive factor in confirming a new bull run will therefore be whether the short squeeze gives way to genuine spot demand, rather than whether trading volume continues to grow. If more investors join in and fear of missing out grips the market, Bitcoin could continue to rise.

Of course, the trend could reverse very quickly. With such rapid gains, that happens frequently. All it takes is for investors to decide to take profits. In that case, there are two scenarios.

The first is that Bitcoin holds the key $72,000 level. If it manages to do so in the coming weeks, we may indeed have witnessed the shortest bear market in Bitcoin’s history.

The second is a major sell-off that takes Bitcoin below the $72,000 threshold and back into the $62,000–$66,000 range. Even this scenario would not necessarily be bad news, as it would confirm the theory of a necessary final drop before a long-term trend reversal. In any case, we are in for a very heated end to the summer in the cryptocurrency market.