Bitcoin bids farewell to the futile search for the sword: A discussion on the solar law and the bottom paradox | Chen Xinshen

On December 1st, I published an article titled "Bitcoin Revelation: The Sun Law and the New Four-Year Cycle" in Hong Kong's Sing Tao Daily and the domestic Sing Tao Global Network. The core purpose of the article is to attempt to deconstruct and dispel two long-standing myths that have constrained market perception: the cyclical belief that "halving must lead to a bull market" and the cost myth of "miner iron bottom." After the article was published, it sparked widespread and profound discussions and feedback from many domestic and international readers, including many valuable questions and challenges. These high-quality interactions mainly revolved around several core issues: "Why has the traditional four-year cycle paradigm declared invalid at the current juncture?" "Is the Sun Law overly simplistic, attributing everything to macro liquidity?" and "Why has the historical effectiveness of miner cost bottoms failed this time?" These sharp and constructive questions not only reflect the true portrayal of the market's collective anxiety but also constitute the strictest stress test of my theoretical framework. They forced me to step out of existing narratives, re-examine every logical link, and conduct a more rigorous scrutiny and refinement of the model. Therefore, this article is not a simple repetition but a rethinking and re-argument based on in-depth feedback. I hope that through this more detailed exposition, I can respond to readers' concerns and explore together how we should construct a more realistic cognitive compass in today's world where Bitcoin has "grown up." Chapter One: Temporal Coordinates - Value Reassessment and Cognitive Divergence in the Post-ETF Era Introduction: The Moment of Value Reassessment in Global Finance By December 2025, the global financial market is at a delicate crossroads. Bitcoin, this digital creation born from the ideals of cypherpunk, has stabilized its market value above $1.86 trillion, quietly surpassing many traditional giants. Wall Street, which once scoffed at it, has now become the main source of incremental funds for Bitcoin through spot ETFs. More significantly, some sovereign wealth funds and central banks have begun to publicly discuss and cautiously include it in their list of candidates for foreign exchange reserves. The rough era of Bitcoin, dominated by geeks, hackers, and early believers, has completely come to an end. It is being unprecedentedly dragged into the spotlight of global mainstream asset allocation. However, on the other side of the world, the cognitive divide remains stark. In China, thirteen ministries, including the central bank, recently issued a joint statement reiterating that virtual currencies do not have the same legal status as fiat currencies, and any related business activities are classified as illegal financial activities. This clear and resolute regulatory signal, while having a decisive purging effect on China's local crypto ecosystem, has increasingly marginalized its influence on the Bitcoin pricing power led by Wall Street. On this grand global financial chessboard, the debate over Bitcoin's "True Value" has never been as intense and futile as it is today. The bearish camp still firmly holds onto the classic discounted cash flow (DCF) model, asserting that an asset that cannot generate stable cash flow and has no physical counterpart must have an intrinsic value of zero. Meanwhile, the bullish camp raises the banner of proof-of-work (PoW) energy consumption and the absolute scarcity of 21 million hard caps, venerating it as the ultimate hard currency of the digital age, a "Noah's Ark" against the global central bank's currency overproduction This protracted debate has not ceased for over a decade. However, the market trends of 2025 provide a cruel yet clear answer: Bitcoin has neither plummeted to zero as the bears predicted, nor has it soared to $500,000 as the bulls dreamed. It has chosen a middle path, evolving into a high beta volatility asset that is extremely sensitive to global macro liquidity. Its fluctuations are no longer merely a solo dance of its own industry narrative, but rather a faithful reflection of global risk appetite and capital tides. Chapter Two: The End of Seeking the Sword by Marking the Boat - The Collapse of the Four-Year Halving Cycle Paradigm Former Tenet: A Certainty Bull Market Driven by Supply Shocks For a long time, the "four-year halving cycle" has been revered by Bitcoin investors as a guiding principle, akin to a "bible" for their investment decisions. The underlying logic of this theory is simple and elegant: the Bitcoin protocol stipulates that approximately every four years, the rewards miners receive for mining new blocks are halved. This means that the new supply of Bitcoin will periodically and predictably shrink significantly. Given stable or growing demand, such a dramatic supply-side shock will naturally trigger a panic over asset scarcity, thereby driving prices into a grand bull market. This logic was nearly perfectly validated in Bitcoin's early history. After the first halving in 2012, Bitcoin experienced an epic bull market in 2013; the second halving in 2016 gave rise to the super bull market of 2017; and the third halving in 2020 opened the door to the institutional bull market of 2021. Three successful predictions solidified "halving must lead to a bull market" from a market observation into an unbreakable collective belief, a nearly "seeking the sword by marking the boat" mechanical operation guide. The Triple Roots of Paradigm Failure: The Confluence of Capital, Scale, and Macro Forces However, entering the 2024 to 2025 cycle, this once infallible belief was ruthlessly shattered by reality. The price of Bitcoin did not immediately embark on a major upward trend after the halving in 2024, and the subsequent price movements became increasingly disconnected from the halving event itself. The root cause lies in three fundamental changes in the underlying market structure, which collectively strangled the old paradigm. First, there was a fundamental replacement of the buyer base. The early market participants were primarily crypto-native investors, tech enthusiasts, and libertarian believers. This group was highly sensitive to internal narratives like the "halving countdown," understanding and believing in Bitcoin's supply model, tending to hold long-term, and actively buying at key points of narrative realization, thus forming positive price feedback. However, since the approval of the U.S. spot ETF in January 2024, there has been a dramatic shift in the power center of the market. Traditional institutions holding massive capital, such as pension funds, mutual funds, hedge funds, and family offices, have become the absolute main force of incremental capital. Institutional investors are fundamentally unconcerned with "how many days until the next halving"; their decision-making framework is entirely based on modern portfolio theory, with core variables being the Federal Reserve's interest rate expectations, CPI, non-farm payrolls, and correlation analysis with other asset classes In their model, Bitcoin is merely a "High Beta Risk Asset" used to enhance portfolio flexibility. Secondly, the mathematical iron law brought about by market capitalization. This is a simple physics problem: the energy required to push a toy car is not comparable to that needed to push a fully loaded train. As Bitcoin's market capitalization has expanded from tens of billions and hundreds of billions to nearly two trillion dollars, the marginal capital inflow required to double its price has shown exponential growth. Looking back at history, Bitcoin increased nearly tenfold in the first cycle, about 30 times in the second cycle, and around 20 times in the third cycle. In this current cycle, even from the deep bear low of $15,500 on November 2022 to the historical high of $126,000 reached in October 2025, the maximum increase is only 7.9 times. The significant reduction in growth clearly reveals a fact: relying solely on the daily new supply reduction brought about by halving (from 900 coins per day to 450 coins per day) has become like a drop in the bucket compared to its massive existing market value, and can no longer independently leverage such a huge financial behemoth. Thirdly, the complete "overwhelming of the main event by the guest." When internal driving forces weaken, the influence of the external environment becomes prominent. The price surge in the first half of 2025 coincided highly with the market's strong expectation that the Federal Reserve would soon begin a rate-cutting cycle; conversely, the rapid price decline entering the fourth quarter perfectly corresponded to unexpectedly strong U.S. economic data, leading to a significant revision of the market's rate-cutting path. Data is the best proof: since 2023, the correlation coefficient between Bitcoin prices and the Nasdaq 100 index has long maintained above 0.85, while the correlation coefficient with the year-on-year growth rate of global broad money supply (M2) has reached as high as 0.91. In contrast, its temporal correlation with halving events has plummeted to 0.32. When Bitcoin's pulse begins to resonate in sync with the heartbeat of global central banks, the era once dominated by the four-year calendar will irreversibly come to an end. Chapter Three: The Sun Law - A New Dual-Driven Paradigm Where Liquidity is King Based on the qualitative changes in the aforementioned market structure, I propose a new analytical framework called the "Sun Law." If the supply-side "halving" is like the moon, which does not emit light but reflects it at specific times, influencing the market's tidal sentiment; then the demand-side global macro liquidity is like the sun, the energy source of the entire financial ecosystem. The dominant force behind Bitcoin's price has completely switched from that fixed "moon" of profit and loss to the radiant "sun" that determines warmth and cold. The Dual Core of the Sun: Resonance of Global Liquidity and Institutional Adoption The core of the "Sun Law" is a dual-driven model that attributes Bitcoin's pricing power to two interrelated demand-side forces: The first driving wheel is global liquidity. This represents the "water level" of the financial market. The Federal Reserve's monetary policy, as the main valve of global liquidity, directly determines the valuation center of all risk assets When the valve is loosened, interest rates fall, and the market "water level" rises, funds will overflow to seek higher-yielding assets. Bitcoin, as one of the assets with the highest beta coefficient, often sees price increases that far exceed traditional assets like stocks; conversely, when the valve is tightened, interest rates rise, and the "water level" falls, Bitcoin's price declines will also be amplified. The second driving force is the large-scale adoption by institutions. This is the "pipeline" that channels macro liquidity into the Bitcoin market. The approval of the U.S. spot ETF in 2024 is a landmark event marking the completion of this pipeline. It opens the floodgates for trillions of dollars of compliant capital. The daily net inflows into the ETF can reach hundreds of millions or even billions of dollars, which is on a completely different scale compared to the daily new supply after the halving (calculated at a price of $120,000, only $54 million). The continuous buying by institutions not only brings real capital but, more importantly, provides "legitimacy" endorsement for Bitcoin, transforming it from a fringe asset into a "standard allocation" in investment portfolios. These two driving forces resonate with each other. A loose liquidity environment encourages institutional investors to increase their risk appetite, accelerating their allocation to Bitcoin; while the large-scale adoption by institutions creates more and more convenient financial instruments (such as options and lending products), further amplifying the impact of liquidity. Mathematical Expression and Weight Analysis of the New Paradigm In summary, the solar law states: In the new era dominated by institutions and ETFs, the price of Bitcoin is approximately equal to "macro liquidity" multiplied by a coefficient composed of "supply-side scarcity narrative" and "dynamic cost game." That is: Price ≈ Macro Liquidity × (Supply-Side Scarcity Narrative + Dynamic Cost Game). In this formula, macro liquidity is the absolute dominant variable, and I estimate its weight has exceeded 80%. The supply-side halving narrative and miner cost game have become secondary. They are no longer independent engines of price but more like catalysts and auxiliary storylines, providing a "logical reason" for the large-scale entry of institutional funds and influencing the lower range of price fluctuations. However, what truly determines the height of a bull market and the depth of a bear market is the net flow of institutions. Chapter Four: The Bottom Paradox - The Mystery of Dynamic Drift of Miner Cost Bottom The Collapse of the "Iron Bottom" Belief When the market enters a correction phase, the question that all investors are most concerned about is always: "Where is the bottom?" In the past decade of market memory, the belief that "the miner cost price equals the iron bottom" is one of the most deeply ingrained and widely cited beliefs. Its logic is simple and intuitive: miners are the guardians of the Bitcoin network, and they need to pay real electricity and hardware costs. If the coin price falls below their comprehensive cost line, they will have no profit or even incur losses, forcing them to shut down. This would lead to reduced selling pressure on Bitcoin, thereby supporting a price rebound. Therefore, the "shutdown price" of miners is regarded as an unbreakable absolute bottom. However, the market situation in November 2025 dealt a fatal blow to this belief. When the price of Bitcoin fell from its high and dropped below the widely estimated "shutdown price" range of $85,000 to $92,000, the anticipated strong rebound did not occur. The price not only failed to stop falling but instead fell into a continuous decline and consolidation This marks the end of the "miner bottom" myth. I have named this phenomenon the "Sinking Bottom Paradox." The Endogenous Mechanism of the Paradox: Negative Feedback Adaptive Difficulty The essence of the "Sinking Bottom Paradox" stems from a brilliant design inherent in the Bitcoin protocol—the Difficulty Adjustment Algorithm. This mechanism means that the miner cost floor is not a static, hard steel plate, but rather more like a "buoy" that automatically adjusts its buoyancy as the market water level sinks. The complete transmission chain is as follows: Stage One: Price drops, breaking through the current cost line. As the price of the coin falls, the first to be impacted are those marginal miners using outdated mining machines and paying high electricity costs. Their cash flow quickly breaks, and mining activities turn from profit to loss. Stage Two: Inefficient miners shut down, total network hash rate declines. To avoid further losses, these inefficient miners will choose to shut down their mining machines. This directly leads to a decrease in the total network hash rate. Stage Three: Difficulty automatically adjusts downward. The Bitcoin protocol stipulates that approximately every 2016 blocks (about two weeks), the network will automatically adjust the mining difficulty based on the block generation speed over the past period. If the block generation slows down due to a decrease in hash rate, the network will lower the difficulty, making it easier to mine a block. Stage Four: Increased output per unit hash rate, reduced costs for surviving miners. The downward adjustment of difficulty is a huge boon for those efficient miners still operating. This means that with the same hash rate (i.e., the same power consumption), they can mine more Bitcoin in a unit of time. This directly leads to a passive decrease in their mining costs, thereby forming a new, lower cost equilibrium point. Buoy, Not Steel Plate: The Path of Cost Floor Descent Historical data has repeatedly and clearly verified this process of "dynamic descent of the cost floor": during the depths of the bear market in 2018, the price of Bitcoin fell from the so-called "cost floor" of $6,000. Accompanied by the price crash, the overall mining difficulty decreased by more than 35% over several months. The cost line initially thought to be a steel bottom ultimately "sank" to around $3,200, where it truly found support. In the bear market of 2022, the same story played out again. With the collapse of Luna/UST and the chain reaction triggered by the bankruptcy of FTX, the price of Bitcoin broke through the estimated cost of about $28,000 at that time. This was followed by a decrease in hash rate and a difficulty adjustment, with a cumulative decline of about 27%, ultimately dragging the cost floor down to around $16,000. Returning to the present in November 2025, since the price fell below $90,000, the total network hash rate has already seen a decline of about 18%. Based on historical patterns, the cost line previously viewed by the market as a "steel bottom" at $90,000 will most likely gradually shift down to a new range of $72,000 to $78,000 after several future difficulty adjustments The core insight of the "Bottom Paradox" is that Bitcoin does not have an absolute, static bottom. It only has a dynamic, flexible support range. The genius design of the protocol ensures that the network will not fall into a "death spiral" even if all miners exit during the most extreme market conditions. However, this powerful adaptive capability completely shatters investors' wishful thinking about "catching the absolute bottom." Chapter 5: The Anchor of Value - A Three-Layer Value System of Dynamic Pricing Goodbye to Point Forecasting, Embrace Range Thinking Since the old cyclical calendar has become ineffective and the solid cost bottom has sunk, investors urgently need a brand new pricing framework to navigate. Saying goodbye to obsessive predictions of specific price points and shifting towards a dynamic understanding of the price range is an essential path to mature investing. To this end, I propose a "three-layer value system," breaking down Bitcoin's price fluctuations into three interrelated but fundamentally different dynamic ranges. Layer One: Survival Value Layer (currently about $45,000 - $54,000) This layer is the "lifeline" of the Bitcoin network, constituted by the marginal production costs of the most efficient miners globally. These miners possess the most advanced mining machines and can access the cheapest electricity resources worldwide. This cost range is a hard constraint for the network's safe survival. Prices are only likely to briefly touch this level during a "black swan" level global systemic financial crisis that leads to a complete liquidity drain. The value at this level is not fixed; it slowly shifts with the iteration of mining hardware and fluctuations in global energy prices. Layer Two: Consensus Value Layer (currently about $74,000 - $105,000) This is the "daily activity zone" of Bitcoin prices and the main battlefield for institutional investors to engage in speculation and pricing. Its value center is determined by a series of complex factors, including: the average holding costs of major institutions (such as MicroStrategy and various ETFs), the regulatory acceptance level of major economies (whether friendly or hostile), on-chain health indicators (such as MVRV Z-Score, NVT Ratio, etc., which reflect market sentiment and valuation levels), and most importantly—macroeconomic liquidity expectations. The current market price is repeatedly testing and confirming in the lower region of this layer. The width and position of this range are dynamically changing, reflecting the collective consensus of market participants on mid-term value. Layer Three: Speculative Value Layer (above $105,000) This layer is the realm of "bubbles and frenzy," where the driving forces are no longer fundamentals or mid-term value consensus, but rather extreme short-term liquidity excess, intense FOMO (Fear of Missing Out) sentiment, and various unverified grand narratives (such as "Bitcoin replacing gold" and "all companies will allocate Bitcoin"). Its typical characteristics include prices severely deviating from fundamental indicators, sharply increased volatility, and soaring market leverage. The historical high of $126,000 set in October 2025 is a typical example of this layer. The bubble in the speculative value layer is fragile and short-lived; once liquidity expectations reverse or market sentiment cools, prices will quickly retreat, returning to the consensus value layer For investors, understanding the current price level is far more important than predicting how many points it will rise or fall tomorrow. Chapter 6: Market Projection for Q1 2026 and Practical Iron Rules Two Core Scenario Projections Based on the New Paradigm Based on the framework of the "Solar Law" and the "Bottoming Paradox," I present two core scenario projections for the Q1 2026 market with relatively high probabilities: Scenario A: Bear Market Inertia and Deep Correction (if traditional cycle inertia persists or the macro environment deteriorates sharply). If the outflow of ETF funds continues to expand and market panic spreads, prices may follow a trajectory similar to the early stages of previous bear markets, undergoing a deep retracement. In this scenario, a moderate retracement target range may be between $80,000 and $90,000; if market sentiment further deteriorates, it could drop to $60,000 to $70,000 to test the important support level from the previous bull market; in an extreme panic scenario (such as accompanied by a global recession), it is not ruled out that prices may briefly touch the upper edge of the "survival value layer," i.e., the range of $50,000 to $60,000. Scenario B: High-Level Volatility and Liquidity Tug-of-War (if the Solar Law completely dominates, liquidity continues to tighten but in an orderly manner). In this scenario, the market will exhibit a "slow-cooking frog" style of gradual decline or wide fluctuations. Prices will repeatedly find support at the lower edge of the "consensus value layer," i.e., the range of $75,000 to $85,000, accompanied by multiple seemingly strong but unsustainable false rebounds. The core of this trend is the tug-of-war between macro liquidity expectations and institutional fund flows. It is important to be cautious; once the significant psychological and monthly level of $100,000 is effectively broken, the market's balance will significantly tilt, and the probability of Scenario B transitioning to the lower range of Scenario A will greatly increase. Three Iron Rules for Investing Through the Fog In the face of such a highly uncertain market with a paradigm shift, investors must abandon old thinking patterns and adhere to three practical iron rules: Iron Rule 1: Abandon Point Beliefs and Focus on Level Switching. Stop asking "How low will it drop before I can buy?" This static point-based question should be replaced with: "At what value level is the current price? Is market energy migrating upward or collapsing downward?" In the speculative value layer, one should decisively take profits in batches; in the lower region of the consensus value layer, one can begin to invest in a disciplined manner; only when prices rarely touch near the survival value layer is it worth considering a larger position allocation. Iron Rule 2: Establish a "Three-Dimensional Dashboard" for Real-Time Monitoring. A single indicator can no longer effectively navigate. You need a three-dimensional decision-making system that includes at least three dimensions: macro dimension (closely monitor global M2 growth rate, 10-year U.S. Treasury real yield, U.S. dollar index, and other leading indicators), institutional dimension (track weekly net flows of U.S. spot ETFs, basis and open interest of CME Bitcoin futures), and on-chain dimension (use MVRV Z-Score, Puell Multiple, 7-day average hash rate changes, net inflows from miners to exchanges, and other data to measure the internal health of the market) Iron Rule Three: Risk management is always the top priority. In the new paradigm, certainty is dead, and uncertainty is the norm. Therefore, the importance of risk management has reached unprecedented heights. Do not heavily invest in any "iron bottom" you believe in; adopt a pyramid-style layered investment strategy, buying more shares as prices drop; always ensure you have some cash on hand as "dry powder" to cope with unpredictable extreme situations; your stop-loss should not be based solely on price but should also be based on status—specifically, when the price effectively falls below a certain value level, it should trigger your risk control mechanism. Conclusion: Building Cognitive Balance on Quicksand I propose the "Sun Law" and the "Bottoming Paradox" not to sing bearish on Bitcoin's future, but rather to allow us to understand its long-term value in a clearer and more rational manner. Bitcoin is not dead; it has simply grown up. The cost of this growth is the transfer of price dominance from the predictable four-year calendar and diligent miners to the Federal Reserve's conference rooms and Wall Street trading floors; retail investors can no longer rely on the simple strategy of "watching the calendar to win"; the reassuring rigid iron bottom has been replaced by a dynamically shifting three-layer value system. All of this may seem cruel, but it is an inevitable path for an asset to mature and enter the mainstream. We are witnessing one of the most profound transformations in Bitcoin's history: a simple, endogenous supply-based calendar cycle is being replaced by a complex, externally demand-driven liquidity cycle. A rigid, static cost-based iron bottom myth is being replaced by a flexible, dynamic game-based three-layer value system. A linear, single-causal inference model is being replaced by a complex system thinking driven by multiple cycles and negative feedback adaptation. Bitcoin has long evolved from a marginal social experiment into an important option on the balance sheets of top global investment institutions. In the face of such a continuously evolving and rapidly adapting financial species, our only way to survive is to constantly iterate our cognitive framework, treating the market's uncertainty with reverence. Only in this way can we build our own cognitive balance on this ever-changing value quicksand, anchoring that long-term certainty that transcends cycles. In this era, the most fatal investment mistake is never the wild rise or fall of prices, but rather our failure to iterate our cognition, stubbornly navigating a brand new sea with an outdated map. Author's Profile: Senior Financial Professional Current Advisor to the National Asset Management Standardization Technical Committee