Rate Cuts, Leverage Flushes, and the Case for a Double Top in Bitcoin

Bitcoin’s Nine Flushes, Liquidity Cycles, Rate Cuts, and the Double-Top Setup

Executive Summary

Across three major Bitcoin cycles—2017–18, 2020–21, and 2024–25—a recurring pattern has emerged: three distinct leverage flushes precede each bull run. These events are marked by sharp drawdowns, liquidation cascades, and open interest resets. The current cycle has already seemingly registered three such flushes, suggesting structural readiness for a sustained rally. However, it is entirely possible this last flush event wasn’t quite big enough and a bigger one awaits or the pattern could break entirely.

With potential rate cuts approaching, macro conditions may echo the liquidity dynamics that fueled the 2020–21 double top. This report outlines the nine-event flush structure, the monetary transmission mechanism, and key indicators for institutional monitoring.

The Nine-Flush Framework

Bitcoin’s historical cycles show a consistent rhythm: three major deleveraging events clear excess leverage before a durable bull run. These are not minor dips but rather they’re decisive resets in derivatives structure, often triggered by macro shocks, regulatory actions, or internal market fragility.

🔹 2017–18 Cycle

1. Sep 15, 2017 – China ICO ban (−17%)

2. Dec 22, 2017 – ATH rejection (−25%)

3. Feb 6, 2018 – Futures wipeout (−20%)

🔹 2020–21 Cycle

4. Mar 12, 2020 – COVID crash (~$1.9B liquidations)

5. Apr 18, 2021 – Hashrate drop + liquidations (~$3–4B)

6. May 19, 2021 – China mining ban (~$2.5B)

🔹 2024–25 Cycle

7. Jan 13, 2025 – ~$460M BTC longs liquidated

8. Aug 25, 2025 – ~$900M total (BTC $277M, ETH $320M)

9. Sep 5, 2025 – ~$228M total (smaller but decisive reset)

The three most recent big flush events

These nine events form a repeatable structure: each cycle clears leverage in three waves before transitioning into a bullish regime. The chart showing total crypto market cap confirms this pattern visually, with clear stair-step drawdowns preceding expansion phases.

Rate Cuts as a Bull Catalyst

The 2020–21 cycle was the only one where rate cuts directly preceded the bull run. In March 2020, the Fed executed emergency cuts totaling 150 bps and launched unlimited QE (Board of Governors of the Federal Reserve System, 2020). Bitcoin responded within days, initiating a multi-month rally (Godbole, 2020). That cycle also produced a double top, with a mid-cycle pause followed by a second peak which was likely amplified by fiscal stimulus like rate cuts and the stimulus checks.

In the current cycle, the September 17, 2025 FOMC meeting may deliver the first cut of the easing cycle. If so, it could trigger a similar liquidity wave, producing an early parabolic move followed by a second leg potentially mirroring the double-top structure.

Bitcoin’s double top last cycle

Mechanism: How Rate Cuts Can Produce Two Peaks

1. Front-loaded liquidity: Rapid cuts and dovish guidance reduce real yields, cheapen leverage, and attract inflows.

2. Mid-cycle repricing: A pause or hawkish shift cools momentum, creating a temporary top.

3. Second leg: As easing is fully priced and demand resumes, a second rally forms—often higher than the first.

This mechanism is not unique to 2021 as it’s a general liquidity dynamic that can repeat whenever monetary conditions shift decisively.

Monitoring Checklist

• Flush validation: Confirm each event via open interest resets, liquidation notional, and funding normalization (Glassnode Ltd., 2021a).

• Fed policy: Track cut size vs. expectations, dot plots, and minutes (Board of Governors of the Federal Reserve System, 2020).

• Real yields: Falling real rates often precede risk-on rotations.

• On-chain flows: Exchange net flows, ETF inflows, and futures OI changes distinguish real demand from mechanical squeezes.

• Dominance dynamics: BTC dominance peaks (~70%) often precede altcoin rotations; Kaspa’s sub-30% positioning may offer asymmetric upside (CoinMarketCap, n.d.; Van Straten, 2025).

• Protocol catalysts: Kasplex smart contract deployment is a high-impact event requiring confirmation via dev activity and on-chain metrics (CoinMarketCap, 2025).

Conclusion

The nine-flush framework offers a falsifiable structure for anticipating Bitcoin bull cycles. Each cycle (2017–18, 2020–21, and 2024–25) has exhibited three decisive leverage resets. With the third flush likely now behind us, and rate cuts potentially imminent, conditions may be aligning for a two-phase rally. The double-top precedent from 2020–21 was not an anomaly, but rather it was a liquidity-driven structure that can repeat under similar macro conditions. Institutional positioning should reflect both the flush-based reset and the potential for a second leg as easing unfolds.

References (APA 7th Edition)

Board of Governors of the Federal Reserve System. (2020, March 23). Federal Reserve issues FOMC statement. https://www.federalreserve.gov/newsevents/pressreleases/monetary20200323a.htm

CoinMarketCap. (n.d.). Bitcoin dominance | CoinMarketCap charts. https://coinmarketcap.com/charts/bitcoin-dominance/

CoinMarketCap. (2025, September 8). Latest Kaspa (KAS) news update — CMC AI. https://coinmarketcap.com/cmc-ai/kaspa/latest-updates/

Glassnode Ltd. (2021a, May 28). Surveying the May 2021 sell-off. Glassnode Insights. https://insights.glassnode.com/surveying-the-may-2021-sell-off/

Glassnode Ltd. (2021b, October 18). The Week Onchain (Week 42, 2021). Glassnode Insights. https://insights.glassnode.com/the-week-onchain-week-42-2021/

Godbole, O. (2020, March 23). Bitcoin, gold spike as Fed unveils unlimited coronavirus stimulus package. CoinDesk. https://www.coindesk.com/markets/2020/03/23/bitcoin-gold-spike-as-fed-unveils-unlimited-coronavirus-stimulus-package/

Gola, Y. (2021, December 10). Trader who called 2017 Bitcoin price crash raises concerns over ‘double top’. Cointelegraph. https://cointelegraph.com/news/trader-who-called-2017-bitcoin-price-crash-raises-concerns-over-double-top

Van Straten, J. (2025, April 22). Bitcoin, stablecoins command over 70% of crypto market as BTC pushes higher. CoinDesk. https://www.coindesk.com/markets/2025/04/22/bitcoin-stablecoins-command-over-70-of-crypto-market-as-btc-pushes-higher/

Disclaimer: This article is purely my personal opinion and exercise of free speech. This is unequivocally NOT financial advice, investment advice, OR a recommendation to buy, sell, or hold ANY asset. You are fully responsible for your own financial decisions. Nothing herein guarantees any outcome. Cryptocurrencies are volatile and you can lose your entire investment. Always do your own research before making any investment decisions.