Four phases of Bitcoin development: How to understand cryptocurrency market cycles

Bitcoin has experienced four consecutive growth waves since its inception, each with unique characteristics and market drivers. Today, as the crypto market stands on the verge of new transformations, understanding the structure of these cycles becomes critically important for investors. Let’s explore how a bull market develops, what signals precede it, and how to prepare for the next wave of the number one digital asset.

Anatomy of the Crypto Market Cycle: From the Voice of One to the Voice of Millions

Each Bitcoin bull market follows a similar logic: limited supply of the asset, a catalytic factor, a wave of conviction, exponential growth, correction, and a new stable equilibrium at a higher level.

Unlike traditional financial assets, Bitcoin grows non-linearly — its cycles combine supply scarcity (resolved through halvings every four years), evolving market perception, and macroeconomic conditions.

Main indicators of a bullish movement:

• Growth in activity of large wallets (so-called “whales”)
• Capital inflow into exchanges via stablecoins
• Expansion of crypto offerings through new ETFs and financial products
• Increased media and social media attention
• Technical breakthroughs: RSI above 70, crossing of the 50-day and 200-day moving averages

How Catalysts Shape Market Cycles

Not all growth is equal. Some rise on speculation, others — on fundamental changes. Over the past twelve years, Bitcoin has gone through three main types of bullish cycles, each driven by different forces.

First cycle (2013): The Gold Rush for Early Enthusiasts

The first major jump in Bitcoin occurred when the price soared from $145 to $1,200 within a year—an increase of 730%. It was a combination of curiosity among tech enthusiasts and a crisis of confidence in the traditional financial system.

The banking crisis in Cyprus in 2013 prompted some savers to consider Bitcoin as an alternative store of value. But the real explosion started with daily trading volume rising from $200 millions at the start of the year to several billion by its end.

However, this first cycle ended in disaster: the hack of Mt. Gox, which handled 70% of all transactions at the time, led to a collapse of trust. The price plummeted by 75% to $300 in 2014, leaving many newcomers at a loss.

Second cycle (2017): The Rise of ICOs and Mass Speculation

Four years later, Bitcoin returned, but on a new stage. This time, ordinary people joined the game.

The price jumped from $1,000 in January to $20,000 in December — a 1,900% increase. The reason: hype around Initial Coin Offerings (ICO), which led to the emergence of thousands of new crypto projects. Mass media created “fear of missing out” (FOMO), and people rushed to buy, often without understanding what they were purchasing.

This time, the catalyst was expanded access to exchanges (platforms appeared that allowed retail investors to easily buy cryptocurrencies) and explosive social media propaganda. But the cycle ended with regulatory clampdowns: China banned ICOs, SEC launched investigations, and the market crashed by 84% to $3,200 in December 2018.

Third cycle (2020-2021): Institutional Money Enters

The third cycle was qualitatively different. It was a period when large corporations and investors began to take Bitcoin seriously.

MicroStrategy added 125,000 BTC to its assets. Square (now Block) invested half a billion. Tesla borrowed $1.5 billion of its reserves to buy Bitcoin. It was not a speculative frenzy — it was a gradual institutionalization of the asset.

The price rose from $8,000 in January 2020 to $64,000 in April 2021 — a 700% increase. The narrative shifted: Bitcoin was positioned as “digital gold,” a hedge against inflation during monetary madness.

However, this cycle also ended with a correction: the price fell to $30,000 in July 2021 (-53%), disappointing many investors who entered at the peak.

2024-2025: New Evolution — ETFs and Government Play

The fourth cycle is unfolding right now, and its architecture differs from all previous ones.

In January 2024, the US Securities and Exchange Commission (SEC) approved spot Bitcoin ETFs. This meant that people could invest in Bitcoin through traditional brokerage accounts without knowing how to use a crypto wallet or what a private key is.

Result: inflow of funds into Bitcoin ETFs exceeded $4.5 billion in less than eleven months. BlackRock alone accumulated 467,000 BTC through its IBIT ETF. Total holdings of BTC across all spot ETFs surpassed 1 million coins — about 5% of all existing Bitcoin.

At the same time, Bitcoin experienced its fourth halving in April 2024. This event halves the rate of new coin issuance. Historically, halvings have preceded significant growth:

• After the 2012 halving, Bitcoin increased by 5,200%
• After the 2016 halving — by 315%
• After the 2020 halving — by 230%

The combination of ETF inflows and supply scarcity pushed the price from $40,000 in January 2024 to $86,900 as of December (according to latest data) — a 117% increase in a year. Analysts’ forecasts point to potential targets above $100,000.

But the most exciting element of this cycle is politics. US Senator Cynthia Lummis proposed the BITCOIN 2024 Act, which envisions the US purchasing up to 1 million BTC for reserves. If approved, this will create demand funded by the government budget, giving Bitcoin the status of a strategic asset — like gold for the new era.

Countries like Bhutan have already accumulated 13,000 BTC through a government investment arm. El Salvador officially adopted Bitcoin as legal tender. This is no longer peripheral — it is changing the structure of the global financial system.

Decoding Market Signals: Technicals and Sentiment

How to recognize when a cycle is approaching? Here are the most reliable indicators.

Technical signals:

RSI (Relative Strength Index) above 70 indicates the market is overheated but also signals strong buying momentum early in the cycle. Currently, Bitcoin’s RSI is in the mid-range, meaning there’s still room for growth.

The 50-day and 200-day moving averages are key trust lines for investors. When the price crosses above the 200-day moving average, it usually signals the start of a new trend. As of December 2024, Bitcoin confidently remains above this level.

On-chain data:

Activity of large wallets provides the most truthful picture of investor intentions. When they buy and hold (on the jargon — HODL), it’s a positive sign. A decrease in Bitcoin reserves on exchanges indicates people are withdrawing coins and holding them rather than selling.

Inflows of stablecoins into exchanges (especially USDT and USDC) show readiness of capital to enter. When stablecoins accumulate on trading platforms, it means investors are preparing to buy.

Macroeconomic factors:

Inflation, interest rates, exchange rates — all influence demand for alternative assets. During periods of high inflation and low rates (like in 2020-2021), Bitcoin becomes attractive. Now, as central banks begin to cut rates again, it creates a positive environment for risk assets.

How Investors Prepare for the Next Wave

If you’re expecting the next bull market, here’s a strategic roadmap:

1. Education — your greatest advantage

Start by studying the Bitcoin whitepaper (original research by Satoshi Nakamoto). Understand why it’s a scarce asset, how blockchain works, and why halvings matter. This knowledge protects you from FOMO and panic.

2. Choose the right entry point

Don’t buy at peaks. History shows the most profitable investments in Bitcoin are made after corrections of 40-60% from previous highs. Now is a good time to enter, but not at the maximum.

3. Diversify your access

Don’t put all eggs in one basket. Consider:

• Bitcoin ETFs for traditional portfolios
• Direct purchases through reputable exchanges
• A small portion in Ethereum and other altcoins for diversification

4. Use hardware wallets for long-term storage

If you plan to hold Bitcoin for several years, don’t keep it on exchanges. Hardware wallets (like Ledger or Trezor) allow you to be your own bank.

5. Develop a stop-loss discipline

Even in a bull market, corrections happen. Set stop-loss levels (20-25% below your average entry price) to protect against panic selling.

6. Monitor new catalysts

Keep an eye on:

• Approvals of new crypto products (ETFs, futures)
• Regulatory changes in the US, EU, and China
• Technological developments (for example, OP_CAT for network scaling)
• Geopolitical events affecting trust in traditional currencies

The Future of Bitcoin: Two Scenarios

Optimistic scenario: Acceptance of Bitcoin as a strategic reserve by the US will trigger a wave of institutional buying. The price could reach $150,000–$200,000 within the next two years. Other countries will follow, creating a new gold standard for the digital economy.

Conservative scenario: Regulatory pressure and macroeconomic shocks will slow growth. The price will fluctuate between $60,000–$100,000 until the next halving in 2028, when the cycle will restart.

Most experts agree that the third scenario (nothing changes, Bitcoin disappears) is unlikely. Too much institutional money, too much political support, too much technological progress.

Conclusion: The Cycle Continues

Bitcoin bull markets are not anomalies; they are a pattern. Scarcity, mining, halvings, and evolving market perception create a predictable (though not certain) sequence of events.

The fourth cycle, unfolding in 2024-2025, differs from previous ones. It’s not a game for speculators or early enthusiasts. It’s institutionalization of a digital asset on the global stage.

If you’ve stayed on the sidelines before, now is the time to learn more. If you’re already an investor, now is the time to be prepared. By understanding cycles, reading market signals, and getting ready for corrections, you can ride the next wave of Bitcoin without having to be at the peak.

There are no guarantees in the crypto market, but there are patterns. And those who understand the patterns are often rewarded by the market.