For many early holders, the Bitcoin halving acted as a simple market compass. Every four years, the protocol cut the block reward in half, new supply dropped, and a powerful rally often followed. The pattern looked clear: the 2012 halving came before the 2013 peak, the 2016 halving came before the 2017 peak, and the 2020 halving came before the 2021 peak.
Grayscale now argues that the Bitcoin market has moved into a different phase. The firm combines its own research with on-chain data from Glassnode and market-structure analysis from Coinbase Institutional. The conclusion points in one direction: halving events still matter, yet they no longer explain the full behavior of the asset.
Grayscale's Analysis: A Shift in Market Dynamics
A large share of the fixed 21 million BTC already trades in the market. Each new halving reduces fresh supply by 50%, yet the relative impact shrinks because fewer coins remain to be mined. Supply shocks therefore lose strength over time. Investors who treated the halving as the only macro signal now face a market that responds to other forces as well.
The report highlights three main shifts in the current cycle. First, institutional capital now drives a large part of demand. Previous cycles relied on retail traders who used exchanges with high turnover and short time horizons. Today, ETFs, corporate balance sheets and professional funds absorb a growing share of supply.
Second, price behavior in the mid-2020s looks far more controlled than in earlier blow-off tops. Rallies in 2013 and 2017 reached extreme valuations and then collapsed. In the current phase, Bitcoin advanced strongly, then dropped around 30% from recent highs. Grayscale describes the pullback as a correction that still fits within a broader bull trend, not as the start of a long winter. The firm compares the pattern with corrections inside equity bull markets rather than classic crypto boom-and-bust arcs.
Third, macro forces now guide the asset to a greater degree. In early years, BTC traded mostly outside mainstream finance. Now, interest-rate expectations, liquidity conditions and fiscal policy sit near the center of many trading desks. Grayscale stresses the role of anticipated cuts from major central banks, bipartisan progress on United States crypto legislation and the integration of Bitcoin into institutional portfolios. Portfolio managers weigh BTC against bonds, equities and gold, not just against other tokens.
Glassnode's On-Chain Signals Support the New Narrative
Long-term holders now control a record share of circulating Bitcoin. Wallets that rarely move coins absorb supply and keep fewer units available on exchanges. As a result, the usual post-halving supply shock weakens, because a large part of the float already sits in inactive addresses. Moreover, realized volatility has stayed below levels recorded at previous cycle turning points, even after strong corrections in late 2025. Markets digest large price swings with fewer liquidations and less panic.
Institutional Demand Through ETFs and Custodial Products
On-chain flows show steady transfers toward addresses linked to regulated funds and institutional custodians. Coins in those wallets tend to remain dormant for long periods. That pattern reshapes supply distribution: more BTC sits in long-term storage, less BTC circulates on trading venues. Grayscale argues that deep, slow capital from institutions now competes with the faster flows from traders, and that balance changes how rallies and pullbacks unfold.
Macroeconomic Indicators Influence Institutional Decisions
Liquidity gauges, policy guidance from the Federal Reserve, and progress on crypto regulation in Congress all feed into portfolio construction models. When real yields fall and risk appetite returns, inflows into Bitcoin ETFs often increase.
When markets fear higher rates or tighter policy, ETF flows slow and some institutions rebalance into cash or bonds. The result is a BTC cycle that aligns more closely with global financial conditions than with a simple clock based on block rewards.
Halving mechanics still play a role. When the protocol cuts miner rewards, miners with higher costs often shut down hardware or seek cheaper power. Hashrate usually dips, then recovers as the network adjusts and more efficient operators step in.
After the 2024 halving, annual Bitcoin inflation fell below levels seen in many major fiat currencies, which reinforced comparisons with scarce assets such as gold. Grayscale does not dismiss that effect; the firm simply argues that supply reduction now interacts with richer layers of demand and macro context.
The Ongoing Debate: Halving Loyalists vs. New Dynamics
On one side, Grayscale presents a Bitcoin market where institutional flows, regulatory progress, ETF demand and long-term holder supply create a pattern that no longer fits a simple four-step cycle. On the other side, halving loyalists argue that supply shocks still form the backbone of every major rally, even if new variables now appear. For investors, the key task lies in updating frameworks without ignoring the monetary design that made BTC unique from the start.