From the perspective of historical cycles, the driving forces behind Bitcoin's price increase: cognition, participation, and risk management

Since its inception in 2009, Bitcoin has experienced multiple cyclical surges. These upward movements are not random but driven by specific market events, policy changes, and participant behavior patterns. Understanding the mechanisms behind these cycles is crucial for participants seeking to profit in the crypto market.

What Drives Bitcoin’s Cyclical Rises?

Bitcoin’s strong cyclical rallies (commonly called bull runs) are typically triggered by several key factors: supply constraints, increased institutional participation, regulatory attitude shifts, and macro-economic environment pushes.

Historically, Bitcoin’s halving events (which occur every four years and halve the rate of new coin issuance) are the most consistent catalysts for price increases. After the 2012 halving, Bitcoin’s price rose from about $5 to over $1,100, a 5,200% increase. Post-2016 halving, the rise was 315%. Following the 2020 halving, the price climbed from around $8,000 to over $60,000, a 700% surge. These data clearly show that reducing supply directly pushes prices higher.

Beyond halving events, changes in market participant composition also have significant impacts. In 2013, media attention and early adopters’ enthusiasm drove prices from about $145 to nearly $1,200 (+730%). In 2017, the large influx of retail investors and the ICO boom pushed Bitcoin from $1,000 to nearly $20,000 (+1,900%), but was followed by an 84% decline. During 2020-2021, large-scale institutional entry—companies like MicroStrategy and Tesla allocating substantial capital to Bitcoin—shifted market dynamics, transforming Bitcoin from a “risk asset” to an “institutional-grade asset.”

Identifying the Start of a Rally: Technical and On-Chain Signals

Not every price increase constitutes a true bull run. Experienced market participants use multiple signals to determine whether a cycle has genuinely begun.

Technical indicators include RSI exceeding 70 (indicating strong buying pressure), breakouts of the 50-day and 200-day moving averages (traditional trend signals), and significant increases in trading volume. In November 2024, Bitcoin’s RSI exceeded 70, and the price broke through key moving averages, reaching around $93,000, setting that year’s high.

On-chain data offers deeper participation signals. Increases in active wallet addresses, inflows of stablecoins into exchanges, and declines in Bitcoin reserves held on exchanges—all suggest accumulation rather than distribution. In 2024, Bitcoin spot ETF inflows surpassed $4.5 billion, and institutional investors like MicroStrategy increased their holdings by thousands of BTC. This directly reduces circulating supply, creating supply pressure.

Macro factors are equally important. The approval of a spot Bitcoin ETF in 2024 provided a regulated, convenient channel for institutional investors, directly boosting demand. Additionally, shifts in political attitudes—such as the U.S. Congress proposing to include Bitcoin in the national strategic reserve (BITCOIN Act of 2024)—further support market sentiment.

Historical Comparison: Evolution of Five Key Cycles

2013: Early Wild Growth

The 2013 rally marked Bitcoin’s first major wave of mainstream attention. Prices rose from about $145 in May to over $1,200 in December, a 730% increase. The driving factors were relatively simple: media coverage surged, early adopters and tech enthusiasts fueled enthusiasm, and the Cyprus banking crisis increased demand for “decentralized money.”

However, this cycle was fragile. Mt. Gox, handling roughly 70% of global Bitcoin transactions at the time, collapsed in early 2014 due to security breaches, causing prices to plummet below $300. This event underscored a key lesson: weak infrastructure can rapidly destroy market confidence.

2017: Retail Gold Rush

2017 saw a massive influx of retail investors. Prices soared from about $1,000 at the start of the year to nearly $20,000 in December (+1,900%). Drivers included: the ICO craze attracting new participants; increased exchange accessibility; and FOMO-driven media hype.

The cycle ended dramatically. In early 2018, Chinese regulators shut down domestic exchanges and banned ICOs, leading to a global market crash. By December 2018, Bitcoin had fallen to around $3,200, an 84% decline. This cycle clearly demonstrated the high volatility of retail-driven surges.

2020-2021: The Institutional Era

The COVID-19 pandemic triggered a global liquidity glut and ultra-low interest rates, boosting Bitcoin’s appeal as “digital gold.” Prices rose from about $8,000 in early 2020 to over $64,000 in April 2021 (+700%).

This cycle was characterized by a shift in participant quality. Public companies like MicroStrategy, Tesla, and Square began holding Bitcoin as part of their asset allocations. Institutional funds, pension funds, and family offices entered the space. This upgrade in participant profile led to more controlled volatility—though dips still occurred, such as a 53% correction in July 2021, which was less severe than previous cycles.

2024: ETF and Policy Resonance

The 2024 rally was a natural evolution of previous cycles. The SEC approved a spot Bitcoin ETF in January, providing a compliant, accessible route for U.S. investors. Bitcoin’s price rose from about $40,000 at the start of the year to $93,000 in November (+132%). Within three months of ETF launch, over $10 billion in capital flowed in, with total inflows exceeding $4.5 billion by November.

Simultaneously, the April 2024 halving further emphasized supply scarcity. Increased geopolitical uncertainties worldwide also heightened demand for “non-sovereign assets.”

Future Rallies: What to Watch

Based on historical patterns, future bull runs may be driven by:

• Next halving event (2028), creating supply constraints again.
• Official adoption of government strategic reserves—if major economies incorporate Bitcoin into foreign exchange reserves, it could generate unprecedented institutional demand.
• Technological upgrades (e.g., activation of OP_CAT, enabling more complex smart contracts) may open new use cases.
• Further changes in the global financial system—under inflationary and currency devaluation pressures, demand for alternative stores of value could continue to grow.

Three Levels of Participant Awareness

Different types of participants understand and engage with bull runs differently:

Cognitive Level: Understanding Bitcoin’s technical fundamentals, halving cycles, supply models, and macroeconomic links. This forms the basis for rational decision-making, not driven by FOMO.

Preparation Level: Building a clear investment framework—defining risk tolerance, investment horizon, target returns. Choosing secure trading and storage solutions, understanding tax implications. This determines whether you can stick to your strategy during rallies rather than being forced out by volatility.

Execution Level: After identifying cycle signals, entering gradually according to your plan, using stop-loss tools, and periodically rebalancing. This tests discipline rather than prediction ability.

Risk Awareness and Reality Check

Every past bull run was followed by significant corrections. After a 730% increase in 2013, there was a 75% retracement; after a 1,900% rise in 2017, an 84% decline. These are not failures but natural market rhythms.

Current risks include:

• Market saturation—as institutional participation increases, Bitcoin’s capacity to absorb incremental capital may diminish, leading to narrower future gains.
• Policy reversals—while overall regulatory attitudes are becoming friendlier, sudden crackdowns remain possible, causing panic.
• Macroeconomic shocks—recessions, interest rate swings, or black swan events could trigger synchronized declines across risk assets, including Bitcoin.
• Technical and infrastructure risks—although unlikely, major failures at exchanges or wallets could impact the market.

Preparing for the Next Cycle

Based on historical patterns, participants should:

• Build a knowledge framework: Understand Bitcoin’s fundamentals (fixed supply of 21 million, halving cycles), key drivers of past rallies, and how current market structure differs (more institutional involvement, improved regulation).
• Quantify personal participation: Decide on allocation based on risk appetite. Avoid chasing others’ gains; base decisions on your financial goals and timeline. For example, long-term investors (>5 years) can tolerate more volatility; shorter-term participants should be more cautious.
• Use risk management tools: Set stop-loss orders, employ dollar-cost averaging, and take profits periodically. These are not about “beating the market” but protecting oneself amid uncertainty.
• Stay informed: Monitor key indicators—ETF capital flows, major institutional holdings, halving countdowns, policy developments. Combining these can help gauge the current cycle stage.
• Develop contingency plans: Decide in advance under what conditions (price drops, technical breakdowns, policy shifts) you will reduce or exit positions. Having a plan prevents impulsive decisions during extreme volatility.

The Essence of Cycles

Bitcoin’s upward cycles are never linear. They are driven by technological advances, evolving participant structures, macroeconomic shifts, and policy changes. From the chaotic frenzy of 2013, retail mania in 2017, institutional involvement in 2020-2021, to ETF-driven growth in 2024, each cycle reflects further market maturation.

Understanding these cycles is not about “timing perfectly” but about participating rationally—knowing what you are doing, why, and what outcomes to expect. When the next bull run arrives, the greatest gains often go not to those trying to buy the bottom or sell the top, but to those who understand the cycle, are prepared, and act with discipline.

Based on current signals—ETF inflows, increasing institutional holdings, supply constraints from halving, and policy improvements—the seeds for the next cycle are already planted. But remember, while history may repeat, it will not be identical. Continuous learning, caution, and patience are key to sustained success in the crypto market.