Navigating the Four-Year Business Cycle: Economic Trends, Elections, and Cryptocurrency Halvings

Renowned macroeconomic analyst Raoul Pal emphasizes the significance of the four-year business cycle, which closely aligns with the U.S. presidential election cycle and Bitcoin’s halving cycle. Understanding this cyclical pattern is crucial for predicting economic policies, market trends, and investment opportunities.

The Four-Year Business Cycle and Its Seasonal Phases

Pal conceptualizes the business cycle as comprising four distinct "seasons," each lasting approximately one year:

1. Macro Spring (Year 1 – Post-Election Year):

   • The economy recovers from previous downturns.

   • Governments and central banks often implement stimulative policies, such as quantitative easing (QE) - injecting liquidity into the markets.

   • Risk-on assets, including stocks and cryptocurrencies, begin to recover and show upward momentum.

2. Macro Summer (Year 2 – Midterm Year):

   • Economic growth reaches its peak.

   • Consumer spending and business investments are strong.

   • Markets typically experience a bull phase, with risk-on assets performing well.

3. Macro Autumn (Year 3 – Pre-Election Year):

   • Growth starts to plateau, and inflation concerns may emerge.

   • Central banks often begin tightening monetary policy to prevent overheating.

   • Bitcoin’s halving event generally occurs during this year, reducing the rate of new Bitcoin supply and setting the stage for a future bull market.

4. Macro Winter (Year 4 – Election Year):

   • The economy slows down, sometimes leading to recession.

   • Monetary tightening through quantitative tightening (QT) reduces liquidity, bringing about bear markets.

   • Cryptocurrencies often enter a correction phase before the next halving initiates a new cycle.

     
     

Bitcoin Halving and Its Synchronization with the Business Cycle

Bitcoin undergoes a halving event approximately every four years, reducing the mining reward and decreasing the supply of new bitcoins entering circulation. Bitcoin halving is a pre-programmed event that occurs roughly every four years, cutting the block reward for miners in half. This process is embedded in Bitcoin’s code to control inflation by reducing the number of new bitcoins introduced into circulation. Since Bitcoin has a fixed supply cap of 21 million coins, halvings create scarcity, which has historically driven its price higher.

Historically, this event has coincided with the third year (Macro Autumn) of the business cycle, leading to a supply shock that often propels Bitcoin and other cryptocurrencies into a bullish phase.

• Pre-Election Year (Year 3 – Macro Autumn):

  • The halving typically occurs, reducing Bitcoin supply.

  • Scarcity often contributes to increased prices, attracting investors.

• Post-Halving Year (Year 4 – Macro Winter):

  • Historically, Bitcoin enters a bull market as reduced supply and sustained demand drive prices higher.

  • Risk-on assets may initially struggle due to tightening monetary conditions but tend to rebound as liquidity returns in the next cycle.

    
    

Performance of Risk-On Assets Across the Cycle

• Macro Spring and Summer (Years 1 and 2):

  • Economic expansion and increased liquidity support strong performances in risk-on assets like stocks and crypto.

  • Cryptocurrencies begin to gain momentum post-halving, historically outperforming other risk-on assets.

• Macro Autumn (Year 3):

  • As economic growth stabilizes and monetary policies tighten, markets become more volatile.

  • Bitcoin halvings historically mark the beginning of crypto bull runs, with altcoins experiencing even more pronounced gains.

• Macro Winter (Year 4):

  • Economic slowdowns and reduced liquidity result in market corrections and potential bear markets.

  • Crypto often experiences significant pullbacks before the next cycle of liquidity injections and risk-taking begins.

    
    

Where We Stand in 2025 and What’s Next

As of March 2025, the U.S. economy is in Macro Autumn (Year 3 – Pre-Election Year) of the four-year cycle. Key economic indicators suggest a late-cycle expansion:

• Stable services activity and employment, consistent with late-cycle dynamics.

• Softening in manufacturing, signaling a potential economic slowdown.

• The latest Bitcoin halving occurred in April 2024, historically a precursor to a strong bull market for cryptocurrencies.

Projected Outlook:

• Remainder of 2025 (Late-Cycle Expansion): The economy is expected to continue stabilizing, with markets experiencing volatility but potential crypto gains as post-halving effects take hold.

• 2026 (Macro Winter – Recession): Projections suggest a possible economic contraction with GDP declines, reduced liquidity, and market corrections.

• 2027-2028 (Recovery and Next Bitcoin Halving): Economic recovery is anticipated, with the next Bitcoin halving in April 2028 potentially igniting another crypto bull cycle.

Business Cycle and Crypto Seasons

Understanding the interplay between the four-year business cycle, Bitcoin halving events, and market performance provides valuable insights for investors and policymakers. As of 2025, the economy is in a late-cycle expansion, with potential recessionary risks in 2026. However, Bitcoin’s halving history suggests that crypto markets could experience strong gains in the coming months before the broader economic cycle resets. Investors should remain vigilant, aligning strategies with these macroeconomic and crypto-specific cycles to optimize opportunities and mitigate risks.