KEYTAKEAWAYS
- Crypto-related equities embed structural leverage to digital assets, allowing companies like Bitcoin treasuries and exchanges to outperform traditional tech stocks in favorable macro regimes.
- Stablecoins increasingly function as financial escape valves in inflationary economies, accelerating currency collapse while simultaneously extending dollar liquidity where traditional banking systems fail.
- Regulatory clarity, particularly through the CLARITY Act, may unlock institutional
CONTENT
Crypto is moving beyond cycles as crypto equities, stablecoins, and regulation reshape market structure, institutional access, and long-term capital flows.
Bitwise: Why Crypto Is Moving Beyond the Four-Year Cycle
participation by redefining crypto assets, accelerating ETF approvals, and reshaping relative performance across major Layer 1 networks.
The discussion around crypto market cycles has gradually shifted from timing tops and bottoms to understanding structural changes. Building on Bitwise’s argument that crypto is moving beyond the traditional four-year cycle, this article focuses on the less obvious extensions of that thesis: the role of crypto-linked equities, the political economy of stablecoins, and the regulatory clarity that could unlock a new phase of institutional participation. These areas are often discussed separately, but in reality they are deeply connected.
Rather than treating crypto as a standalone asset class, it is increasingly useful to view it as a system that interacts with capital markets, sovereign currencies, and regulatory power. It is within these intersections that the most asymmetric outcomes are likely to emerge.
2.3 CRYPTO EQUITIES AND THE POWER OF LEVERAGED EXPOSURE
One of the more controversial ideas in recent research is that crypto-related equities could significantly outperform traditional technology stocks over the next cycle. Companies such as Coinbase, MicroStrategy, and publicly listed mining firms are often compared to Nasdaq technology names, yet this comparison misses a key point.
Crypto equities embed a form of structural leverage. Their revenues, balance sheets, and valuations are not just tied to user growth or software margins, but to the underlying crypto assets themselves. When crypto prices rise, the equity response is often non-linear. This “leveraged beta” is precisely why these stocks tend to underperform sharply during downturns and outperform dramatically during recoveries.
MicroStrategy is the most extreme and most debated example. In many investor circles, it is widely believed that the company is playing a dangerous leverage game that will inevitably collapse. The core argument is familiar: borrowing to buy Bitcoin works only as long as prices rise, and once prices fall below the average acquisition cost, the entire structure supposedly becomes unstable.
Interestingly, this skepticism is often strongest among retail investors and even among experienced market participants. That divergence itself is worth paying attention to, because disagreement is often where alpha is born.
Before examining the mechanics, it is worth acknowledging that this skepticism is not irrational. At a superficial level, MicroStrategy looks like a highly leveraged Bitcoin bet. However, that interpretation assumes traditional margin logic, forced liquidations, and short-term refinancing pressure. Michael Saylor is not operating within that framework.
MicroStrategy’s Bitcoin purchases are not funded by 10x margin loans. They are primarily financed through the issuance of convertible and preferred bonds with several distinctive characteristics. First, the interest rates are extremely low, often 0% or well below 1%. Second, the maturities are long, largely concentrated between 2027 and 2032. Third, and most importantly, there is no liquidation threshold. As long as the company can service interest payments, it is never forced to sell Bitcoin at depressed prices.
This distinction is critical. Forced selling is what destroys leveraged strategies. In MicroStrategy’s case, forced selling is structurally avoided. The company still operates a legacy software business that generates meaningful cash flow. That business now contributes roughly $120 million in quarterly revenue, which is small relative to the company’s market capitalization but large enough to service interest obligations.
As a result, the real risk is not short-term price volatility. The real question is whether MicroStrategy can address principal repayment when bonds mature. Here again, the structure is more flexible than it appears. Convertible bonds do not necessarily need to be repaid in cash. If Bitcoin appreciates, bondholders can convert debt into equity. If Bitcoin stagnates or declines but interest remains serviceable, the company can refinance, issue new debt to retire old debt, or even issue equity.
As of December 30, 2025, MicroStrategy holds approximately 672,500 BTC at an average cost of $74,997, with the stock trading around $155.39. Several tranches of bonds issued in 2025, including zero-coupon bonds maturing in 2030, have conversion prices near $433. At current equity prices, conversion is unattractive for bondholders, meaning Saylor simply continues paying minimal interest.
Looking ahead to 2027, the situation becomes clearer. If Bitcoin trades above MicroStrategy’s average cost, there is no economic incentive to liquidate holdings to repay debt. Even in a stressed scenario, refinancing or equity issuance remains viable. Only a prolonged collapse in Bitcoin prices, for example a sustained move toward $30,000 lasting multiple years, would seriously threaten the structure.
This is why MicroStrategy is better understood not as a ticking time bomb, but as a large, long-dated Bitcoin call option embedded in a public equity. The strategy is simple but aggressive: borrow fiat that structurally depreciates over time and acquire an asset with a fixed supply of 21 million units. As monetary expansion continues to erode the real value of debt, the burden of repayment declines in real terms.
In essence, MicroStrategy is making a macro bet on the future of the U.S. monetary system. It is an explicit wager that dollar debasement continues and that Bitcoin increasingly functions as a monetary hedge. This is not a trade; it is a financial thesis executed at scale.
2.3 STABLECOINS AS SCAPEGOATS IN EMERGING MARKET CRISES
Another striking idea in the Bitwise report is the prediction that at least one emerging market currency could collapse by 2026, with governments publicly blaming stablecoins for capital flight. While this may sound dramatic, the logic is straightforward and historically consistent.
When inflation accelerates into triple-digit territory, citizens abandon local currency regardless of legal restrictions. In previous decades, this flight took the form of physical dollars or offshore accounts. Today, it increasingly takes the form of USDT or USDC.
Capital controls are effective only when money moves through regulated banking channels. Crypto bypasses those channels entirely. As a result, stablecoins can accelerate the visible collapse of a currency that was already fundamentally broken.
This dynamic helps explain why some governments remain deeply cautious toward crypto adoption. It also highlights why stablecoins play a critical role in countries experiencing monetary failure. In such environments, stablecoins are not speculative instruments; they are survival tools.
Traditional banks often frame stablecoins as non-compliant, opaque, or destabilizing. In reality, stablecoins fill a liquidity vacuum created by constrained or dysfunctional banking systems. Even in developed markets, this pattern appears in subtler forms. Despite nominal rate cuts in the U.S., commercial banks remain unwilling to expand credit aggressively. In that gap, stablecoins become a secondary liquidity arena.
There is also a geopolitical dimension to this process. As regulatory frameworks such as the CLARITY Act and the GENIUS Act advance, the U.S. appears to be shifting from resisting stablecoins to absorbing them. Rather than banning stablecoins, the more effective strategy is to regulate and integrate them as extensions of dollar dominance.
Under this model, decentralized or offshore stablecoins like USDT risk marginalization, while U.S.-regulated stablecoins such as USDC gain institutional legitimacy. Early pioneers may ultimately serve as cautionary examples, allowing regulated successors to dominate global digital dollar circulation.
This dynamic mirrors the broader relationship between gold, Bitcoin, and monetary sovereignty. Control over settlement layers matters. Stablecoins are becoming one of those layers.
2.4 WHY THE CLARITY ACT MATTERS
The Digital Asset Market Clarity Act is repeatedly emphasized in Bitwise’s research for good reason. It addresses the single largest barrier to institutional participation: regulatory uncertainty.
The Act proposes a clear classification framework for crypto assets. Highly decentralized assets with no controlling issuer are treated as digital commodities under CFTC oversight. Assets whose value depends on the efforts of a specific team are classified as investment contract assets under SEC jurisdiction. Payment stablecoins form a third category with tailored oversight.
This distinction is not academic. Assets classified as digital commodities can move more easily into spot ETFs, face fewer disclosure burdens, and are more accessible to institutional portfolios. At present, Bitcoin clearly fits this category, while Ethereum and Solana are widely expected to follow.
The Act has already passed the House of Representatives and remains under Senate review. Industry expectations point to committee deliberation in early 2026, with potential passage later that year. If progress accelerates, the market response is unlikely to be linear. Ethereum and Solana could experience significant repricing relative to Bitcoin as regulatory clarity expands their institutional addressable market.
3. QUESTIONING THE RESEARCH NARRATIVE
Despite its strong logic, the Bitwise report is not neutral. It is, ultimately, written for buyers. That does not invalidate its arguments, but it does require caution.
Current market reality remains challenging. Bitcoin ETFs continue to see net outflows, total ETF holdings are declining, and capital is rotating toward assets such as gold and silver. Nominal rate cuts have not translated into lower real rates, which remain elevated due to persistent inflation. Meanwhile, aggressive U.S. Treasury issuance continues to drain liquidity.
Institutions are not absent because they doubt crypto’s long-term value. They are absent because opportunity cost remains high elsewhere. This is why real rates, not policy headlines, remain the key variable to watch.
4. CONCLUSION
Taken together, Bitwise’s framework points to a market that is structurally evolving, not repeating. Crypto equities offer leveraged exposure to asset appreciation. Stablecoins sit at the fault line between collapsing currencies and dollar expansion. Regulatory clarity, if achieved, removes the final institutional barrier.
For long-term investors, the question is not whether these trends are real, but when they converge. Timing remains uncertain. Structure is not. And in markets, structure eventually asserts itself.
