Winter Is Coming
Timing is everything when it comes to the best performing asset of the past decade.
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Well actually, winter is already here…
They say not to time the market. Other than that is just a marketing tactic for you to put your money in their funds and never withdraw it, it is not good advice. If we don’t want to get destroyed in bear markets and want to make real money it is the only way. High performing assets like bitcoin can drive those crazy returns. The problem is, you HAVE to time bitcoin, or be hit with a 70% crash every few years.
Bitcoin has gone down a lot recently, already having crashed 52% off the October 2025 high. Every bear market there’s a lot of talk about it being the end of bitcoin. On the flip side, I’ve seen many people getting so much hope when it rallies trying to call the bottom along the way.
I’m here to give an honest take on what the price will do not built on hope or fear, but mechanics.
Philosophically and economically, Bitcoin offers some hope. If possible, getting money out of the government’s hands would undoubtedly be the best thing for humanity. I’ve written about its usefulness in the past (1,2), but I’m not blind to some of the risks and valid skepticisms. It will prove itself over the long run (or not).
On a shorter time frame we can use it as an investment vehicle to generate returns. It has been one of the best performing assets in many years over the past decade. It has blown the S&P500 out of the water, even with its brutal bear markets. Clearly catching the green years would drive meaningful returns, even with small allocations. Timing is important to avoid giving it all back in dramatic red years.
Bitcoin doesn’t have earnings to base valuations on. Commodities have the economics of mining and processing which determine new supply, offering some grounding to the asset. Bitcoin was engineered digitally in a similar way, having real decentralized process to create new bitcoin in a constrained fashion, unchangeable by market participants (can’t instantly mine all the gold or bitcoin).
This is one reason why commodities and crypto have more volatility than stocks. If there’s no cash flow to base the value on, then it is sentiment leading the way. While definitely even more driven by sentiment than the stock market (given the rise in things like astrology and other weird bitcoin predictors), is it merely sentiment driving the bitcoin price?
Mike Green, while generally acknowledged as a bitcoin bear, has done some good work on the asset. He is one of the top flow analysts, with his passive investing thesis explaining some key phenomena in the stock market. He has also shown ETF flows are the dominant driver of BTC.
Flows turned negative at the end of 2025, which predicted the slide in price. Recently, this relationship has fallen, meaning liquidations and other factors were likely driving the most recent price declines, not necessarily that the data doesn’t apply anymore. This could mean that we are closer than not to the bottom, but that is speculation. How can we know?
Michael Howell is a world leading expert on liquidity and global liquidity cycles. He shows that the liquidity cycle has a relationship to bitcoin. This is the next clue that gives us an idea of when there is ample money to chase higher volatility assets and boost ETF flows. He shows that with good correlation, there is a 13 week lag from changes in the liquidity cycle to changes in the bitcoin price.
The current liquidity cycle peaked in late 2025, meaning the growth in liquidity has started to wane. This seems counter intuitive since the fed has had “tight” conditions without quantitative easing or low interest rates, but other methods helped keep liquidity conditions loose and growing in the US. Ironically (now that the Fed started to lower interest rates), financial conditions are expected to get tighter. This helps explain why bitcoin and the stock market have struggled, and could give us clues to when bitcoin may turn.
Right now, bitcoin is at 68k, one deviation below the 200 day moving average and nearing the 200 week moving average. It is oversold on a relative strength basis and could be a good buy here. That could be true for the long term, but we don’t want to mess this up.
You may have heard me refer to the bitcoin “seasons” in my portfolio updates. Spring is green, summer is yellow, fall is orange, and winter is blue. The bitcoin bottoms have been very cyclical so far, occurring every four years. Summer is the exponential move up, while winter is the crash phase. Previous winters lasted between 336 and 420 days and had crashes of 73% to 80%. It has currently only been winter for 168 days with a crash of 52%.
This is not nearly the extent of past cycles, meaning there is more time and correction to come if we assume history repeats. While not always the best assumption, we have mechanistic data to give us clues. With the liquidity cycle turning down and not expected to increase until at least late 2026 or 2027, there will be less liquidity for those ETF flows that drive bitcoin’s price. If the flow spigot is closed, bitcoin should continue to lag.
Technically, there are a confluence of Fibonacci targets around the August 2024 low at 49k which would act as major support. It corresponds to my likely count of wave (v) (purple box) of circle c (orange box) down. It also lines up closely with the 61.8% retracement from bitcoin’s inception to the all time highs. It would also be a 61% drop instead of 52%, closer to historic cycle norms.
Bitcoin isn’t a bad buy here, especially for the long haul, especially if we see a sudden influx in money printing. However, there is likely another 29% flush lower alongside another ~150 days before the bitcoin “spring” starts time-wise. You can hope all you want for bitcoin to go higher, the drivers of price are telling you it is not time yet. These mechanistic factors actually correspond nicely to the bitcoin seasons with the bear market over near the end of this year or early next.
Heed the warning that there is more bear market left, but don’t be convinced the asset is toast. Whether we merely retest support around 80-100k or go on to all time highs, this would drive returns far superior than the general stock market. Real tactical portfolio diversification through bitcoin, commodities, etc are real ways to drive meaningful returns instead of handing your money over to institutions just trying to collect their fee. Until next week,
-Grayson
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For educational and entertainment purposes only. The Gray Area should not be taken as financial advice.