Why this report matters

Many traders have framed Bitcoin as either an inflation hedge or a gold-like safe-haven asset that should benefit during periods of geopolitical stress, such as the current Iran conflict. However, recent price action challenges that narrative, as Bitcoin has sold off alongside other risk assets, leaving many participants confused about its true drivers.

In the 2020–2021 cycle, the stock-to-flow model gained traction, framing Bitcoin as a scarcity-driven asset constrained by limited supply relative to rising demand. By contrast, the 2024–2025 cycle saw many traders anchor to more abstract liquidity indicators, such as M2, which we highlighted as unreliable as early as August 2025 (see our report: “The Famous Bitcoin Liquidity Signal Is Failing—Here’s the Replacement”).

The introduction of Bitcoin ETFs has brought a new class of investors, largely from Wall Street, into the market, placing greater emphasis on macro variables rather than on-chain adoption or network growth metrics. But not every “macro” indicator is relevant for Bitcoin.

Contrary to our analysis, many retail investors believed that the traditional four-year cycle would extend into a five-year cycle. This misplaced confidence kept them positioned long well into the subsequent decline. In doing so, they overlooked the macro variables that truly drive Bitcoin, instead relying on obscure money supply models that, at best, show only a temporary and coincidental relationship with price action rather than a causal one.

Bitcoin (log YoY) vs. US Dollar Index (RHS YoY) - inverse