Oil price shocks the Federal Reserve—Has the Bitcoin cycle truly been broken?

I. A Split in Market Narratives

Bitcoin has been consolidating for a period above $77,000. The market’s views on the second half of the year are sharply divided.

Optimists believe the $60,000 level in February is the bottom of this bear market, and that the second half will recover steadily. Cautious participants warn that new lows are still possible, and that the true bottom may be at $55,000—or even lower. Pessimists predict that the bear market will extend into 2027.

Different people say different things, making it difficult to reach consensus.

A deeper problem is a split in methodology. Some believe the four-year cycle is still effective, and that everything is within a pattern. Others believe the cycle has already been broken and that a completely new analytical framework is needed. Still others look only at macro data, arguing that oil prices and the Federal Reserve determine everything.

The Chain believes these debates cannot reach consensus because there is no unified methodology.

Let’s return to a basic philosophical framework: internal causes are the basis for the development of things, external causes are the conditions for development, and external causes act through internal causes.

When you look at Bitcoin using this framework, many things become clearer.

II. What Are Bitcoin’s Internal Causes?

Internal causes are the contradictions inherent in the thing itself—contradictions that determine its essence and development trend. Bitcoin’s internal causes include at least four layers.

The first layer is the fundamental contradiction: the supply rigidity caused by halving versus the demand’s price elasticity. This is the deepest driving force of the four-year cycle. Every four years, the mining reward halves, changing the market’s supply-demand structure from the supply side. This mechanism is written into the code and will not change with oil price fluctuations.

The second layer is the technical-economic contradiction: the contradiction between the cost of hash power and the coin price. Miners spend energy and hardware to mine, and cost determines their behavior. When the coin price falls below cost, inefficient miners are forced offline, hash rate declines, and the market rebalances.

The third layer is a contradiction within the market: the tension between long-term holders and short-term speculators. LTHs (Long Term Holders, long-term holders) are responsible for accumulation and distribution; STHs (Short Term Holders, short-term holders) are responsible for providing liquidity. When “chips” move from strong hands to weak hands, the market tops out; when they move from weak hands to strong hands, the market bottoms out. On-chain indicators such as MVRV and SOPR measure the state of this contradiction.

The fourth layer is the contradiction between narrative and reality: Bitcoin is touted as “digital gold” and an anti-inflation asset, but its actual price movements are often highly correlated with the Nasdaq. This contradiction determines how resilient Bitcoin’s performance is under different macro environments.

These four layers of internal causes form a cycle framework that makes Bitcoin relatively independent of macro conditions. They will not disappear just because oil prices rise or fall.

A counterexample can prove the existence of internal causes. In 2023, the Fed was still in a tightening cycle and the macro environment was not friendly. Yet Bitcoin rose from $16,000 to above $70,000. What drove this rally was the halving expectation and the ETF narrative—these are things at the internal-cause level.

If external determinism were correct, the extremely accommodative macro environment of 2020 to 2021 should have caused Bitcoin to rise in a one-way move. In reality, it went through multiple rounds of drawdowns of 30% or more.

Therefore, internal causes are the basis. External causes are only the conditions.

III. The Current Oil Price Shock: How External Causes Come Into Play

Cryptoslate published an article on April 25 analyzing the impact of the oil price shock on the Fed and Bitcoin[1].

The article’s logic chain is: tensions in the Strait of Hormuz lead to disruptions in oil supply; oil prices rise and push up inflation; the Fed is forced to maintain a hawkish stance; and Bitcoin comes under pressure.

The Chain believes the value of this analysis lies in accurately identifying the most important external variable at present. But its treatment of causality is overly linear, which can easily make people think that oil prices directly determine whether Bitcoin rises or falls.

First, look at the facts.

On April 20, shipping through the Strait of Hormuz nearly came to a standstill. After warning shots and the seizure of an Iranian cargo vessel, only a very small number of ships passed within 12 hours. Normally, the passage volume is about 130 ships per day.

St. Louis Fed President Alberto Musalem said high oil prices could keep core inflation around 3%, far above the 2% target. New York Fed President John Williams said the Middle East situation is already pushing up inflation pressures and increasing uncertainty.

The Fed will hold an FOMC meeting from April 28 to 29, and it will release Q1 GDP and PCE data on April 30. These events are compressed into three days, so the market needs to digest, all at once, new concerns about inflation, statements from the Fed, and key economic data.

These facts are clear.

The problem is that the transmission path from oil prices to Bitcoin is not a straight line. Oil prices do not directly push Bitcoin down; instead, they generate effects by acting on Bitcoin’s internal causes.

Specifically:

• Oil prices rising increases energy costs, which affects miners. Inefficient miners shut down, hash rate declines in the short term, and this affects Bitcoin’s security and narrative. But efficient miners survive, and industry concentration may increase.

• Rising inflation expectations caused by oil prices will affect the narrative of digital gold. If Bitcoin shows anti-inflation properties in this round, the narrative will be reinforced. If it falls along with risk assets, the narrative will be weakened.

• Oil prices delay rate-cut expectations, which affects short-term speculators’ opportunity cost. With risk appetite declining, speculative funds flow out, and short-term selling pressure increases.

• Macro uncertainty caused by oil prices will affect the behavior of long-term holders. They may accelerate accumulation and treat Bitcoin as a safe-haven asset; they may also reduce holdings and rotate into gold or USD. Which one occurs needs to be observed through on-chain data.

So, for the same oil shock, Bitcoin’s ultimate direction depends on the net effect after these forces contend. Under different internal-cause states, the same external-cause shock may lead to different outcomes.

This also helps explain why, in 2022 and 2026, both involve high oil prices but Bitcoin’s performance may differ. In 2022, the internal causes were the second year after halving, which historically leans bearish, and the direction of both internal and external causes was aligned—resonating downward—resulting in a very deep drop. In 2026, an additional internal variable—institutional buying driven by ETFs—offset part of the external pressure.

IV. The Cycle Has Not Been Broken—Only Modulated

Many people in the market say the four-year cycle has already been broken. The Chain believes this claim needs to be carefully distinguished.

First, let’s say what has not been broken.

Halving still occurs once every four years. The change in supply rigidity still exists. The contradiction between miners’ hash power costs and the coin price is still in operation. The rotation of “chips” between LTH and STH remains the core mechanism behind the bull-bear shift. On-chain indicators such as MVRV and SOPR still show cyclical patterns similar to those in the past.

The skeleton of the cycle remains.

What truly changes is the weight of external causes.

In Bitcoin’s early days, the linkage between external macro conditions and it was weak. Price movements were mainly driven by internal narratives. Now it’s different. Bitcoin’s market cap is large enough, and its connection to the global financial system is deep enough. The Federal Reserve’s rate decisions, changes in global M2, and geopolitical risks—all these external variables are increasingly influencing prices.

You can use a physics analogy to understand this.

Bitcoin’s internal causes are like the natural frequency of an oscillator—roughly one cycle every four years. External macro causes are external driving forces, whose frequency and amplitude are constantly changing. Actual price trends are the superposition of the oscillator’s inherent oscillation and external driving.

When the external driving frequency approaches the natural frequency, the amplitude is amplified. When the phase is opposite, the movement becomes tangled and messy. When the external driving force is strong enough, the periodic characteristics of the inherent frequency can be masked—though not eliminated.

The correct understanding of “breaking the cycle” is not that the cycle disappears, but that the weight of external causes rises so significantly that the inherent cycle of internal causes is modulated. Amplitude and phase change, but the skeleton is still there.

This also explains another previously discussed question: why the bull market in 2021 had smaller gains than 2017, but the bear market in 2022 still had a very deep decline?

Because the gains in the bull market are limited by the diminishing marginal effects of the halving narrative—this is a change at the internal-cause level. But how deep the bear market goes depends on whether internal and external causes resonate. In 2022, internal causes leaned bearish (the second year after halving), and external causes also leaned bearish (aggressive rate hikes). They resonated downward, so the decline was naturally not small.

For 2026, the direction similarly depends on whether internal and external causes resonate or hedge each other.

V. Three Scenarios for the Second Half of 2026

Based on the internal-external framework, three scenarios can be inferred.

Scenario A: Steady Recovery

On the internal-cause side, the historical pattern of the second year after halving tends to be bearish, but ETF-driven institutional buying provides structural support. On the external-cause side, oil prices fall, rate-cut expectations get repaired, and the macro environment shifts from tight to loose.

The relationship between internal and external causes is hedging: external causes shift from bearish to bullish, offsetting the bearish pressure from internal causes. The result is that $60,000 is the bottom; in the second half, prices oscillate upward and gradually challenge previous highs.

The institutions representing this scenario are Bernstein, VanEck, and Grayscale. VanEck’s analysts noted that Bitcoin’s hash rate is recovering and that funding rates are in negative territory—these are bullish technical signals[2].

Scenario B: Build the Base After Making New Lows; Recovery in 2027

Internal causes are bearish, and the pressure from the second year after halving has not yet been fully released. On-chain indicators such as MVRV have not entered historical bottom ranges yet. On the external-cause side, oil prices remain stubbornly high; the Fed maintains a hawkish stance; and rate-cut expectations are pushed further out.

Internal and external causes are aligned and lean bearish, but not in an extreme resonance. As a result, Bitcoin falls into the $55,000 to $60,000 area, completes the final leg down, then begins building a base; recovery comes in 2027.

This scenario is represented by some on-chain analysts at CryptoQuant.

Scenario C: The Bear Market Extends Into 2027

On the internal-cause level, in addition to the bearish pressure from the second year after halving, miners also face profitability pressure as energy costs rise. If the coin price remains lackluster for a sustained period, there could be a wave of large-scale shutdowns. Long-term holders’ willingness to accumulate could also be shaken by continuous declines.

On the external-cause side, oil prices remain high, rate cuts are delayed until 2027, and even a recession may occur. The Fed is caught between inflation and growth.

Internal and external causes resonate downward, and it is not a short-term resonance—it is a resonance stretched over time. The result is that Bitcoin falls to $45,000 or even lower, and the recovery is delayed until after the second quarter of 2027.

This scenario is represented by several veteran traders and on-chain analysts. Peter Brandt believes the market is still missing one final capitulation-style selloff. Willy Woo predicts that the typical bear-market bottom range is around $45,000; if macro conditions worsen, $30,000 and $16,000 are deeper defenses. Benjamin Cowen believes the four-year cycle remains intact and it is far too early to declare the bear market over.

VI. How to Observe the Balance of Internal and External Forces

For investors who do not want to guess whether prices will rise or fall, it’s more important to build an observation framework.

Internal-cause observation indicators include: whether the MVRV Z-score has entered historical bottom ranges; whether LTH net positions are accumulating or being distributed; whether miner hash rate and difficulty have begun a broad decline; and whether SOPR—which measures the short-term holders—has already reached a state of panic capitulation.

External-cause observation indicators include: changes in the probability of rate cuts shown by CME FedWatch; the oil price trend and the geopolitical developments in the Strait of Hormuz; and the weekly fund flows into Bitcoin ETFs—these are intermediary variables through which external causes act on internal causes.

The most critical judgment is whether internal and external causes are in resonance or in hedging.

When in resonance upward, both sides are long, and the market is likely to break out strongly. When in resonance downward, both sides are short, and there will be deep pullbacks, similar to 2022. In hedging conditions—one long and one short—the market will likely show a range-bound pattern, choppy trading, a slow bull, or a slow bear trend.

Right now, the market is probably at some point within a hedging state.

VII. Conclusion

Returning to the question posed at the beginning of this article: has Bitcoin’s four-year cycle truly been broken?

The Chain believes the cycle has not been broken. The contradictions at the internal-cause level—halving, supply and demand, miners, hoarders versus speculators—are still at work. The skeleton of the cycle remains.

What has changed is the weight of external causes. Bitcoin is no longer a fringe asset floating outside the global financial system. Its market cap is large enough, and its connection to macro conditions is deep enough. Oil prices, the Fed, and liquidity—these external variables have a bigger impact on Bitcoin than ever before.

External causes act through internal causes. The same external shock can lead to different results under different internal-cause conditions. This is one of the most basic principles of dialectics, but it is often forgotten in market discussions.

For the second half of 2026, no one can provide a definite prediction of whether prices will rise or fall. The market is complex, and the interplay between internal and external causes creates multiple possibilities. But what is clear is this: regardless of which of the three scenarios becomes reality, recovery in 2027 is highly likely.

Because Bitcoin’s internal causes will not disappear. Halving continues, and scarcity keeps increasing. And external causes—macro liquidity—will eventually turn. The Fed cannot tighten forever, and the long-term trend of global M2 is expansion.

Under a unified analytical framework that considers both internal and external causes, investors can have less anxiety about short-term price swings and more grasp of long-term structure. Instead of arguing about whether $60,000 is the bottom, it’s better to observe variables such as oil prices, FedWatch, and ETF flows—and how they translate into Bitcoin’s on-chain signals.

Stick to dollar-cost averaging and add more when prices dip. Stick with a long-term mindset.