Bitcoin’s Disappointing Cycle and the Path to Renewed Demand

Summary

The February 17, 2026 episode of Coin Stories features Lyn Alden arguing that Bitcoin’s latest cycle underperformed because topline demand remained weak despite supportive liquidity signals. Alden contends that absent retail participation, intense competition from AI equities, and limited sovereign buying capped upside even as ETFs expanded access. She maintains that Bitcoin’s long-run thesis remains intact, but future gains depend on renewed adoption and capital rotation rather than expectations of a sudden monetary “nuclear print.”

Take-Home Messages

1. Demand, Not Just Liquidity: Bitcoin’s muted cycle reflects insufficient marginal buying pressure rather than a simple failure of monetary stimulus.
2. AI as Capital Magnet: AI-linked equities absorbed investor attention and returns, raising Bitcoin’s opportunity cost.
3. Financialization Is Structural: ETFs and derivatives may dampen volatility but are an inevitable stage for a large asset.
4. Gradual Policy Easing: Incremental balance sheet expansion supports risk assets broadly but does not guarantee Bitcoin outperformance.
5. Adoption as the Decisive Variable: Long-term upside hinges on whether more individuals and institutions choose self-custodial, undebasable savings.

Overview

Lyn Alden opens with a candid assessment that this cycle failed to deliver the explosive upside many participants anticipated, noting that price peaked near $126,000 rather than exceeding the $150,000 threshold she viewed as a more robust outcome. She argues that market sentiment deteriorated unusually early, with even long-term holders expressing fatigue as the rally lacked the broad enthusiasm seen in earlier cycles. In Alden’s view, Bitcoin’s maturation alone cannot compensate for weak incremental demand.

Alden attributes much of the shortfall to missing retail participation, explaining that retail typically arrives when an asset dramatically outperforms alternatives and commands attention. This time, she says, AI-related equities captured that spotlight, offering visible productivity gains and rapid price appreciation that diverted both capital and narrative energy. Without a parallel speculative wave, Bitcoin lacked the spillover excitement that previously amplified its moves.

She addresses claims that ETFs and derivatives suppressed price, acknowledging that institutional access may reduce extreme volatility but emphasizing that such financialization is unavoidable for a multi-trillion-dollar asset. Alden contrasts Bitcoin’s transparent custody model with gold’s more persistent paper claims, arguing that Bitcoin’s structure limits prolonged distortions once solvency concerns arise. The simpler explanation, she suggests, remains modest topline demand rather than structural price manipulation.

On macro policy, Alden rejects expectations of an imminent crisis-scale monetary expansion, describing a base case of gradual balance sheet growth absent a severe shock. She notes that Bitcoin’s historical correlation with liquidity holds most of the time but can diverge when valuations stretch or when competing assets absorb capital flows. Looking ahead, she anticipates a grinding bottoming process in which stronger hands accumulate supply before a renewed uptrend can emerge.

Stakeholder Perspectives

1. Long-Term Holders: Confront volatility fatigue and reassess conviction as cycles extend and relative performance lags high-growth equities.
2. Institutional Allocators: Evaluate Bitcoin against AI equities, gold, and broad indices, weighing custody advantages against opportunity costs.
3. Retail Investors: Delay engagement without dramatic outperformance, slowing education-driven adoption.
4. Policymakers and Central Banks: Monitor gradual versus crisis-level stimulus scenarios that shape Bitcoin’s macro hedge narrative.
5. Energy and Infrastructure Stakeholders: Assess competition for power as AI data centers prioritize high-uptime electricity near population centers.

Implications and Future Outlook

Alden’s analysis implies that Bitcoin’s next advance depends less on a single catalyst and more on whether capital rotates once competing trades appear saturated. If AI equities plateau and Bitcoin remains underowned in stronger hands, even modest incremental demand could restart upward momentum. In that scenario, attention itself becomes reflexive, with rising prices rebuilding the narrative that attracts new participants.

Her gradual policy outlook suggests that incremental liquidity expansion will support risk assets broadly but will not override asset-specific fundamentals. In a subdued macro environment, Bitcoin’s performance will hinge on adoption rates, custody preferences, and the durability of its network effects rather than on stimulus alone. This shifts the strategic focus from predicting central bank action to assessing structural demand.

The conversation also underscores the psychological dimension of extended cycles, where disappointment can influence allocation behavior. Diversification, Alden argues, can reduce forced selling and help investors maintain long-term positions through volatility. For decision-makers, the central variable becomes whether Bitcoin transitions from an “insurance” asset to a widely recognized savings instrument.

Some Key Information Gaps

1. What percentage of global assets would validate the decentralized ledger thesis? Clarifying this benchmark is essential for modeling Bitcoin’s long-term addressable market and informing institutional allocation frameworks.
2. Why did Bitcoin diverge from M2 trends during this cycle despite prior correlation? Understanding this divergence improves macro forecasting and cross-asset risk modeling.
3. Under what conditions might capital rotate from AI equities back into Bitcoin? Identifying rotation triggers would help allocators anticipate shifts in relative performance.
4. How sensitive is Bitcoin’s price to incremental versus crisis-level liquidity injections? Distinguishing these regimes informs expectations about Bitcoin’s hedge function.
5. Is Bitcoin’s network effect sufficiently entrenched to prevent meaningful fragmentation? Evaluating this resilience clarifies long-term competitive dynamics within decentralized ledger systems.

Broader Implications for Bitcoin

Monetary Regime Competition

Bitcoin’s muted cycle amid gradual monetary easing highlights an emerging competition between digital scarcity and productivity-driven equity narratives. Over the next three to five years, capital may increasingly oscillate between “hard money” assets and technology growth sectors depending on inflation, earnings expectations, and geopolitical stress. This dynamic suggests that Bitcoin’s role in portfolios will evolve from a singular macro hedge to a strategic allocation within a broader regime-competition framework.

Energy Allocation and Infrastructure Priorities

The discussion of AI data centers competing for power reveals a structural shift in how energy markets allocate scarce electricity. As AI workloads cluster near population centers while Bitcoin mining gravitates toward stranded supply, grid planning and pricing models may diverge across jurisdictions. Policymakers and utilities will need to reconcile these different demand profiles to maintain reliability while enabling digital infrastructure expansion.

Adoption as Financial Literacy Infrastructure

Alden’s emphasis on education and self-custody signals that Bitcoin’s trajectory depends on more than price cycles. If individuals increasingly view Bitcoin as portable, undebasable savings rather than a speculative instrument, adoption may proceed steadily even without dramatic rallies. Over a multi-year horizon, this reframing could reshape savings behavior, cross-border payments, and reserve strategies in both developed and emerging economies.

Portfolio Construction in a Post-Volatility Era

As Bitcoin matures and institutional products proliferate, its integration into diversified portfolios may become standard rather than exceptional. Lower volatility relative to earlier cycles could expand its eligibility within pension funds, endowments, and sovereign wealth portfolios. This normalization would alter capital flow patterns and reduce reliance on retail-driven parabolic phases.

Geopolitical Reserve Signaling

Limited sovereign participation in this cycle raises questions about how and when states might accumulate Bitcoin as a strategic asset. Over the next several years, selective sovereign adoption could function as a signaling mechanism about monetary diversification and geopolitical alignment. Such moves would extend Bitcoin’s influence beyond market performance into the realm of strategic reserve policy.