Understanding Bitcoin’s four-year cycle is crucial. Discover why a strategy focused on cycles is vital for advisors to enhance volatility management and optimize client outcomes.
By Markus Thielen|Edited by Sarah Morton Jun 18, 2026, 3:00 p.m. 6 min readMake preferred on ShareShare this articleCopy linkX (Twitter)LinkedInFacebookEmailMake preferred on (Hannah Morgan/ Unsplash)SummaryShowYou’re reading Crypto for Advisors, CoinDesk’s weekly newsletter that unpacks digital assets for financial advisors. Subscribe here to get it every Thursday.
In this week's newsletter, Markus Thielen from 10x Research discusses why a cycle-focused strategy is more effective than traditional Dollar-Cost Averaging for bitcoin investments.
Additionally, in the “Ask an Expert” section, Eric Tomaszewski from Verde Capital Management explains why advisors should delve deeper than superficial metrics to uncover where genuine growth is occurring.
If you have a moment, TrackInsight is evaluating how advisors are integrating crypto ETFs into client portfolios. Participate in this 2-minute survey and gain early access to the findings.
Crypto ETFs: The Importance of Trading the Cycle Rather than Dollar-Cost Averaging
The approach that benefits the S&P 500 can lead to significant losses in bitcoin. Recognizing this can transform your investment strategy.
Dollar-cost averaging (DCA) is a widely accepted method in traditional finance, allowing investors to distribute purchases over time to mitigate volatility and avoid the pitfalls of market timing. This method works well for stocks and bonds, which tend to appreciate steadily, making it suitable for most retail investors.
However, using DCA for bitcoin is a prevalent and detrimental error that many advisors make on behalf of their clients.
Since 2011, bitcoin has undergone four complete market cycles. Each cycle typically follows a similar trajectory: a halving event decreases the supply of new coins, demand accelerates, prices surge significantly, leverage builds up, and then the cycle reverses, resulting in drawdowns that have historically exceeded 70%.
For a buy-and-hold bitcoin investor, the peak-to-trough drawdown throughout its history has been as severe as −80%. This is not merely a theoretical risk; it has happened on three separate occasions. Typically, investors capitulate near the lowest point, missing the subsequent recovery. While the long-term returns may appear impressive on a graph, they come with significant risks.
DCA may provide slight smoothing of returns, but an investor who consistently bought bitcoin during the 2021–2022 cycle still faced severe mark-to-market losses in the bear phase. This approach offers psychological reassurance rather than mathematical safety, as it doesn't reduce exposure when market conditions shift negatively.
The alternative to DCA is to maintain awareness of market regimes. Bitcoin often experiences prolonged phases, usually lasting 12 to 18 months, in identifiable bull or bear markets, either compounding gains rapidly or losing significant value. The critical realization is that these phases can be predicted using observable data related to price movements and the on-chain economics of the Bitcoin network.
Our research monitors ten independent indicators, including momentum, trends, and on-chain cost-basis metrics, which collectively help identify the prevailing market regime. The results are clear: when most indicators are positive, bitcoin's average monthly return reaches +25%. Conversely, when the majority are negative, the average return drops to 6%, resulting in a 31-percentage-point difference.
A cycle-aware long-only strategy produced a Sharpe ratio of 1.22 in backtesting, compared to 0.82 for a buy-and-hold strategy over the same 15-year timeframe. More significantly, it reduced the maximum drawdown from −80% to −44%. For clients with a defined investment policy or fiduciary obligations, this distinction is crucial for risk assessment.
For wealth managers, this indicates that bitcoin should be included in a diversified portfolio; its long-term return potential is genuine, and its diversification benefits are quantifiable. However, the framework for allocation must accurately represent bitcoin's nature.
Bitcoin is a cyclical asset influenced by a four-year supply schedule, waves of institutional adoption, and leverage cycles that amplify both gains and losses. Advisors should consider establishing a dynamic allocation range instead of a fixed position. For instance, a mandate could allow for a maximum 5% allocation to bitcoin, but the actual deployment could vary between 100%, 50%, or 0% depending on the market cycle. Rules-based regime signals, whether proprietary or sourced from third parties, can guide these allocation decisions without necessitating subjective market predictions.
The success rate of a cycle-aware strategy may be lower than that of a buy-and-hold approach, winning not by frequent accuracy but by avoiding the periods when bitcoin drops by 20%, 30%, or 40%. These downturns tend to cluster, and opting out during these times is not about market timing; it's about understanding the cyclical nature of the asset.
Since 2022, we have made three public, timestamped market predictions: identifying the cycle bottom in October 2022, projecting a target of $125,000 in July 2023, and issuing a bear signal in October 2025, all based on the same signal framework. While this methodology is not foolproof, it is systematic, verifiable, and fundamentally more aligned with bitcoin's cyclical characteristics than the passive strategies most advisors currently adopt.
Bitcoin rewards those who grasp its cycles. Advisors who treat it as any other asset risk forgoing risk-adjusted returns and exposing clients to downturns that could severely impact their portfolios.
- Markus Thielen, CEO, 10x Research
Ask an Expert
If blockchain technology thrives, are investors holding the right assets?
For years, it was assumed that the growth of a blockchain ecosystem would naturally lead to an increase in value for its native token. However, I am increasingly skeptical that this is always the case. Technology can become essential while value accrues to other components like sequencers, applications, stablecoin issuers, or liquidity layers.
As fiduciaries, the task may not solely be to identify which assets are being used but also to understand where economic value ultimately resides and whether traditional valuation methods need to adapt alongside technological advancements.
What if the market is significantly underestimating Ethereum's potential?
Currently, there seems to be a fixation on whether Layer 2 solutions are taking away fees and users from Ethereum. However, reserve assets have never derived their worth from their frequency of use; instead, they gain value from being held, trusted, and utilized as collateral.
If ETH develops into a productive collateral asset for institutions, decentralized organizations, and eventually AI agents, we may look back and realize we overlooked the emergence of a digital reserve asset while debating gas fees.
The world's reserve currencies were established not through spending but through saving and trust.
What if the most significant opportunity lies not in AI or crypto, but in their convergence?
The Industrial Revolution paired machinery with energy, while the internet connected humans with information. The next significant era may combine autonomous intelligence and agents with programmable finance.
If AI can engage in economic activities and blockchain serves as the foundational trust and settlement layer, investors might need to redefine what constitutes infrastructure.
Although the timing and extent of this convergence remain uncertain, transformative opportunities often arise at the intersection of major technological shifts.
What if crypto's greatest inefficiency is the focus on measuring activity instead of ownership and value capture?
For years, the industry has celebrated metrics like Total Value Locked (TVL), yet TVL often reflects more about assets held within a protocol than the economic benefits flowing to its owners.
Protocols like Hyperliquid have challenged traditional approaches by focusing on revenue distribution and alignment with token holders, while Aerodrome's shift towards predictive and continuous allocation indicates that capital itself is becoming programmable and optimized dynamically.
As the crypto landscape matures, the most significant opportunities may arise not by identifying the most active protocols but by recognizing those that effectively capture, allocate, and deliver real economic value to their owners.
- Eric Tomaszewski, financial advisor, Verde Capital Management
Watch of the Week
CoinDesk Data and Indices President Dave LaValle discussed with The Wealth Advisor the increasing momentum of Wall Street's entry into bitcoin ETFs.
- He highlighted The Morgan Stanley's Bitcoin Trust ETF, which launched in early April and amassed over $230 million in assets in just a month, marking the first spot bitcoin ETF from a significant U.S. bank.
- He also countered the notion of treating crypto as a distinct asset class: "It's not the crypto market or the TradFi market. It's the market."
- Watch the full interview at The Wealth Advisor.
Looking for more? Stay updated with the latest crypto news from coindesk.com and market insights from coindesk.com/institutions.
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CEX Volumes Drop to Lowest Since September 2024 as RWA Perps Hit Record High
CEX Volumes Drop to Lowest Since September 2024 as RWA Perps Hit Record High
In May, combined exchange volumes decreased by 3.45% to $4.41 trillion; the lowest level since September 2024. RWA perpetual futures volumes increased by 10.4% contrary to the trend, achieving a new all-time high.
By CoinDesk ResearchJun 15, 2026In May, combined exchange volumes decreased by 3.45% to $4.41 trillion; the lowest level since September 2024. RWA perpetual futures volumes increased by 10.4% contrary to the trend, achieving a new all-time high.
Why it matters:
In May, combined exchange volumes decreased by 3.45% to $4.41 trillion; the lowest level since September 2024. RWA perpetual futures volumes increased by 10.4% contrary to the trend, achieving a new all-time high.
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