The Mystery of Bitcoin Cycles: From Niche Experiment to Mainstream Financial Transformation

Since its inception in 2009, Bitcoin has experienced several waves of remarkable crypto bull markets, each time redefining market perceptions. These cycles are not random fluctuations but are woven together by specific economic events, policy changes, and market psychology. By interpreting these historical trajectories, we can better understand future investment opportunities and risks.

What Drives Bitcoin’s Cyclical Rises?

Bitcoin’s bull market cycles are not without pattern. In-depth analysis reveals that several key factors repeatedly propel BTC prices to breakouts.

Supply Tightening Mechanism: The Magic of Halving Events

The Bitcoin protocol establishes a unique mechanism—every four years, the mining reward is automatically halved. This design creates an artificial scarcity. Historical data shows that the periods around halving often accelerate BTC prices: after 2012 halving, the price surged by 5,200%; after 2016 halving, by 315%; after 2020 halving, by 230%. This is not mere coincidence but a direct reflection of supply-side contraction in the price discovery process.

Turning Point of Institutional Recognition

In January 2024, the US SEC approved a spot Bitcoin ETF, marking a critical milestone. This is not just approval of a financial product but a formal acceptance of digital assets by the traditional financial system. As of November 2024, these ETFs have absorbed over $2.8 billion, far surpassing the performance of gold ETFs in the same period. This move breaks psychological barriers for institutional investors, shifting Bitcoin from a “risky asset” to an “alternative asset class.”

Self-Reinforcing Market Sentiment

When prices rise, media attention increases; media coverage attracts new participants; new participants push prices higher. This feedback loop was most evident in 2017—when the ICO boom drew millions of novice investors into the Bitcoin ecosystem, ultimately driving BTC from around $1,000 at the start of the year to nearly $20,000.

Four Key Moments in History

2013: The First Explosion in the Testing Ground

In 2013, Bitcoin soared from $145 in May to $1,200 in December, a 730% increase. At that time, Bitcoin was mainly circulated among tech enthusiasts and cypherpunk circles. The Cyprus banking crisis that year gave a push—facing government freezes on deposits, some investors began to consider the value of decentralized assets. However, early 2014, a major exchange security breach led to a 75% crash, pouring cold water on the market. This event also reminded the market: infrastructure fragility is a fatal flaw for early-stage crypto assets.

2017: From Geek Culture to Mainstream

If 2013 was the “small circle era,” 2017 marked the beginning of the “mass participation era.” From $1,000 at the start of the year to nearly $20,000 by year-end, a nearly 2,000% increase made Bitcoin a hot topic at dinner tables and family chats. Daily trading volume surged from less than $200 million at the start of the year to $15 billion.

What was the real engine behind this surge? The ICO craze. Thousands of new projects raised funds by issuing tokens, mostly based on Ethereum and other platforms. Their success ignited a desire for the entire crypto ecosystem. Retail investors flooded in, many for the first time engaging with digital assets. However, this frenzy led to a brutal correction in early 2018—BTC fell over 80%, and the market only regained momentum in 2019. This cycle taught participants that faster growth often comes with larger corrections.

2020-2021: The Awakening of Institutions

This period was not just about rising prices but a fundamental change in the composition of Bitcoin market participants. From $8,000 in early 2020 to $64,000 in April 2021—a 700% increase—what changed was the profile of buyers.

Public companies like MicroStrategy, Tesla, and Square began to include Bitcoin in their corporate assets. The SEC approved Bitcoin futures ETFs, and large asset managers like BlackRock started researching Bitcoin deeply. By the end of 2021, publicly listed companies held over 125,000 BTC, with institutional net inflows exceeding $10 billion.

The keyword here is “digital gold”—facing global central bank easing policies and inflation pressures, traditional institutional investors started viewing Bitcoin as an inflation hedge. This changed everything, altering the type of buyers and their holding cycles.

2024: The New Narrative—The Era of ETFs

The current rally has risen from $40,000 at the start of the year to $93,000 in November (touching a new high of $126,080), a gain of over 132%. What makes this bull market unique is its institutionalization.

Spot Bitcoin ETFs absorbed over $1 billion within a week, setting a rare record for rapid growth in financial products. BlackRock’s Bitcoin ETF alone manages over 467,000 BTC. On-chain data shows Bitcoin balances on exchanges continue to decline, indicating that large institutions are “storing assets” rather than engaging in short-term trading.

Meanwhile, Bitcoin’s fourth halving in April also contributed to the rally. Discussions about Bitcoin becoming a strategic asset for the US further add to the imagination surrounding this cycle.

How to Identify Signals of the Next Cycle?

Technical Indicators

When the RSI surpasses 70, it often signals the formation of strong buying momentum. In 2024, Bitcoin’s RSI has remained in this zone for an extended period. More importantly, golden crosses between the 50-day and 200-day moving averages often precede trend reversals—and in recent months, this signal has appeared multiple times.

On-Chain Data Truths

Active large wallet addresses, the scale of outflows from exchanges, and inflows/outflows of stablecoins—these data points often tell more than price alone. When we see large amounts of stablecoins flowing into exchanges, it indicates readiness for large buy orders. Conversely, the opposite suggests selling pressure. Data from 2024 shows institutional wallets are continuously accumulating, a clear bullish signal.

Macro Indicators

Global central bank policies, the strength of the US dollar, geopolitical events—these macro factors are often overlooked but are major variables. Expectations of Fed rate cuts in 2024 create favorable conditions for Bitcoin as a safe-haven asset.

Future Possibilities and Traps

Bitcoin as a National Asset in the Future

Some countries are considering adding Bitcoin to their foreign exchange reserves. Bhutan, through its sovereign investment fund, has accumulated over 13,000 BTC, a significant asset for a small nation. El Salvador has even adopted BTC as legal tender. If the US or other major economies follow suit, Bitcoin’s demand could increase exponentially.

Technological Upgrades Empowering Bitcoin

The Bitcoin network itself is evolving. Discussions about restoring certain code functionalities could introduce Layer-2 scaling solutions, theoretically increasing transaction throughput to thousands per second. This would transform Bitcoin from merely “digital gold” into a true financial infrastructure.

Risks on the Other Side

High volatility remains a double-edged sword. Mass retail participation often coincides with market tops. The lesson from 2017—when taxi drivers discussed coin prices—is often the last phase of madness. Additionally, regulatory uncertainty, macroeconomic recession risks, and environmental pressures could at any time become price suppressors.

Preparing for the Next Cycle

Knowledge Over Timing

Learning the fundamentals of Bitcoin, understanding halving cycles, and studying historical data often yield higher returns than blindly chasing rallies.

Strategy Over Gambling

Define your investment goals (short-term trading vs. long-term holding), and choose appropriate tools accordingly. For long-term holding, hardware wallets and dollar-cost averaging are more rational; for short-term trading, risk management and stop-loss strategies are essential.

Security Always First

No matter how hot the market, secure private key management, using reputable platforms, and diversified assets are fundamental.

Emotion Management and Information Discrimination

Markets are filled with various voices—from extreme bearishness to blind optimism. Learning to discern signal from noise, focusing on on-chain data and institutional movements rather than social media sentiment, is a mark of mature investors.

Final Thoughts

Bitcoin’s cycles are not coincidence but the result of multiple factors—supply scarcity, institutional recognition, market psychology, and macro environment—working together. The 730% rise in 2013 and the 1,900% in 2017 are now history. Future growth may not be as explosive (due to larger bases), but the drivers—enhanced institutionalization, expanded use cases, and absolute supply scarcity—are strengthening the fundamentals.

For investors, understanding these cycles’ internal logic is more valuable than predicting the exact timing of the next peak. When the next crypto bull market arrives, no one can predict precisely; but if you grasp the essence of the cycle, you can at least avoid the biggest mistake—being unaware when the historic moment arrives.