The traditional four-year cycle model governing the Bitcoin (BTC) market is increasingly demonstrating a decline in its predictive power, as political developments are exerting a more significant influence on asset prices. In this evolving market landscape, pricing is being driven by policy statements and liquidity expectations, rather than by internal supply chain data.
While global equity markets are anticipated to experience a strong rally in 2025, Bitcoin's performance is not expected to mirror this ascent to the same degree. This divergence suggests that the market is prioritizing liquidity expectations and the timing of policy decisions over a general appetite for risk. According to the established classic model, early 2026 would typically represent a late-cycle or post-peak period; however, current price movements indicate that investors are delaying this expected transition.
Bitcoin's Sensitivity to Liquidity and Policy
Ryan Yoon, a senior analyst at Seoul-based Tiger Research, observes that Bitcoin tends to react preemptively when markets anticipate "implicit monetary expansion." Yoon posits that Bitcoin possesses a high sensitivity to liquidity, which consequently positions it as a market leader. Implicit monetary expansion refers to liquidity support provided by central banks through fiscal or regulatory channels, distinct from formal asset purchases, with the objective of suppressing borrowing costs.
This market transformation is being fueled by pre-election fiscal stimulus measures and an increasing ambiguity between monetary policy objectives. A report titled "Binance's 2025 Year-to-Date Review and 2026 Themes" characterizes this environment as "financial repression." The report further elaborates that Donald Trump's imposition of tariffs and public pressure on Jerome Powell to lower interest rates have collectively blurred the distinctions between fiscal, trade, and monetary policy.
Shifting US Policy and Digital Asset Support
Consequently, US policy has shifted from conventional monetary tightening strategies to managing financial conditions and suppressing borrowing costs through fiscal expansion and regulatory interventions. The report highlights that this strategic combination cultivates a structurally supportive environment for digital assets. Specifically, expansionary fiscal policy coupled with suppressed real yields diminishes the attractiveness of traditional investments like government bonds and bank loans, thereby increasing interest in alternative financial avenues.
According to the report, governments, with the United States at the forefront, are contemplating substantial spending packages amounting to trillions of dollars in anticipation of the 2026 midterm elections. Concurrently, the escalating levels of public debt are constricting the Federal Reserve's capacity for decisive action and heightening the risk of implicit liquidity leaks via regulatory channels.
Regulatory Clarity and Future Market Direction
Peter Chung, Research Director at Presto Research, points out that the cryptocurrency sector benefits from significant lobbying power. He further notes that the upcoming midterm elections provide a compelling incentive for US lawmakers to establish effective cryptocurrency regulations. Chung suggests that while market narratives are in constant flux, the CLARITY Act is a critical factor that will shape the sector's long-term growth trajectory.
While the advent of spot ETFs continues to provide structural support from the institutional demand side, experts concur that the ultimate direction of the market will be dictated by policy developments. Chung emphasizes that policy decisions will have a direct impact on the demand from institutions that are focused on long-term fundamentals. Yoon adds that the next twelve months represent a crucial period, noting that if regulations do not align with the timing of liquidity expansion, their potential impact may be limited.