ETF Adoption Disrupts Bitcoin’s 4-Year Cycle, Easing Volatility
Diaman Partners’ latest analysis shows Bitcoin’s historical four-year halving cycle has weakened. By applying the Diaman Ratio, researchers found no bubble-phase growth (ratio >1) in the 2021–2024 cycle, aside from a brief spike around US spot ETF approvals. Annual volatility has plunged from over 140% in Bitcoin’s early years to around 50% today. Correspondingly, one-year rolling returns have declined and flattened over the past three years, and four-year average returns trend downward as market cap expands. Despite lower peaks and smoother returns, Bitcoin’s network still generated record wealth per cycle. The approval and rapid growth of US spot Bitcoin ETFs—led by BlackRock’s IBIT hitting $100 billion in assets under management in under three years—has reshaped Bitcoin’s risk-return profile. Future cycles may forgo dramatic crypto winters and exponential rallies in favor of more stable price swings.
Neutral
The analysis points to lower volatility and smoother returns, which reduce downside risk—a positive for market stability—but also dampen the magnitude of rallies, limiting explosive profit potential. The rapid growth of US spot Bitcoin ETFs has underpinned price floors and attracted institutional capital, yet cycle amplitude has softened. In the short term, traders may see fewer extreme volatility trades and adjust to range-bound strategies. In the long run, a more mature and stable Bitcoin market could prevail, balancing lower risk with moderated upside.