Understanding the Future Through Bitcoin Cycles: An In-Depth Analysis of the Rhythm and Patterns of the Crypto Market

Cycles and Breakouts: Understanding Bitcoin’s Periodic Movements

Since its inception in 2009, Bitcoin has experienced multiple significant upward and downward cycles, each shaping the evolution of this digital asset. Today, Bitcoin leads the crypto market with a market cap of over $1.7 trillion, and its price fluctuations influence not only retail investors but also serve as a key reference for institutional investment decisions. Understanding the mechanics of these crypto cycles is crucial for grasping market rhythm.

Bitcoin’s periodic rises are typically driven by several key factors: halving events reducing supply, institutional capital inflows, regulatory attitude shifts, and macroeconomic changes. When these factors align, they often generate strong upward momentum. Currently, Bitcoin is trading at around $88.95K, up more than 120% since the beginning of the year, reflecting this cyclical power.

2013: The First Breakthrough for Digital Assets

Ten years ago, during that winter, Bitcoin experienced its first explosive growth. From $145 in May to nearly $1,200 in December, a total increase of 730%. The driving forces behind this rally were quite straightforward: surging media attention, early adopters entering the market, and infrastructure gradually improving.

The Cyprus banking crisis gave Bitcoin real-world significance—people began to realize that in times of traditional financial system trouble, a decentralized store of value could offer an alternative. However, the catastrophic collapse of Mt. Gox in 2014 (which handled around 70% of global Bitcoin transactions at the time) cooled early enthusiasm, with the market dropping over 75%, serving as a stark warning of risks.

This cycle confirmed an important principle: Bitcoin has resilience to recover from major shocks, but such recoveries often come with intense volatility.

2017: Retail Frenzy and Regulatory Awakening

By 2017, Bitcoin was no longer just a tech geek’s toy. From $1,000 at the start of the year to $20,000 by year-end, a 1,900% increase. The main driver was the ICO craze—daily trading volume expanded from $200 million at the start of the year to $1.5 trillion.

Retail investors flooded in, and everyone was talking about Bitcoin. But this was followed by regulatory caution. China banned ICOs and domestic exchanges, and the US SEC expressed concerns, causing a market reversal. By the end of 2018, Bitcoin had fallen 84% from its peak.

This cycle taught the market that even with strong fundamentals, policy risks can instantly change the narrative.

2020-2021: The Institutional Recognition Turning Point

The economic stimulus and low-interest-rate environment triggered by the pandemic pushed Bitcoin from $8,000 to $64,000 (a 700% increase). But this time, the key word was “institutions.”

Companies like MicroStrategy, Tesla, and Square bought Bitcoin. The narrative shifted from “speculative asset” to “inflation hedge” and “digital gold.” Bitcoin futures and spot ETFs outside the US were approved, providing compliant channels for large funds. By 2021, institutional Bitcoin inflows exceeded $10 billion.

However, this cycle also exposed risks of concentration. Regulatory pressure, ESG concerns (about mining electricity consumption), and market overheating led to a correction, with prices dropping back to around $30,000 in July.

2024-2025: New Patterns Triggered by ETFs

The story now is different. In January 2024, the US SEC approved a spot Bitcoin ETF, opening the door for traditional financial institutions. BlackRock’s IBIT ETF alone holds 467,000 BTC, and the entire spot ETF ecosystem has accumulated over $28 billion in net assets.

Bitcoin has risen from $40,000 at the start of the year to around $88.95K, reaching a high of $93,000. What’s notable this time is the relatively stable capital inflow from ETFs, and the halving event in April (block rewards halved from 6.25 BTC to 3.125 BTC), further tightening supply.

Political factors also add new variables. Countries with crypto-friendly policies, such as Bhutan (via a national investment company) and El Salvador, including Bitcoin in their reserves, signal that Bitcoin is gradually evolving from an asset class to a “quasi-sovereign asset.”

Signal Lights for Recognizing Cycles: Finding Direction from Data

To anticipate the next upward wave, monitor these indicators:

On-chain indicators:

• Declining Bitcoin inflows to exchanges (indicating holders prefer to hold)
• Increasing stablecoin inflows into exchanges (funds preparing to buy)
• Growing number of addresses holding Bitcoin (retail accumulation)

Currently, Bitcoin addresses have reached 55.1 million, showing continuous growth.

Technical signals:

• RSI breaking above 70 often indicates strong momentum
• 200-day moving average crossing above the 50-day MA is a classic trend confirmation These signals appeared in 2024.

Macro factors: Interest rate policies, inflation data, geopolitical risks, and government attitudes often determine institutional capital flows.

New Features of Future Cycles

Unlike the past, future Bitcoin cycles may exhibit these characteristics:

More institutional participation Spot ETFs have become the main channel for large capital inflows, smoothing extreme volatility but potentially extending cycle durations.

Ongoing impact of halving events The next halving is in 2028, and the fixed supply scarcity will continue to support prices long-term. About 95% of the maximum supply is already in circulation, with supply-side pressures gradually emerging.

Increased policy certainty Moving from suppression to clearer regulatory frameworks removes major barriers for institutional participation. Once multiple major economies reach consensus, crypto cycles’ amplitude may be redefined—still significant but potentially longer in duration.

Technological upgrades empowering growth Activating features like OP_CAT could enable Layer-2 scaling and DeFi applications, broadening Bitcoin’s use cases and strengthening its value foundation.

How to Position During Cycles

For investors, understanding the cycle stage is key:

1. Early stage: Data signals start to improve, but market sentiment remains pessimistic. Risk is relatively manageable at this point.

2. Mid-cycle: FOMO spreads, with both institutions and retail flooding in. This is the riskiest phase—easy to get caught at the high point.

3. Late cycle: Prices hit new highs but growth slows down, presenting both risks and opportunities.

How to judge your position? Bitcoin is about 30% below its all-time high of $126K. Institutional net inflows continue, and the halving’s residual effects remain. But market sentiment shows signs of overheating. This position is typically in the mid-to-late stage of the cycle—opportunities coexist with caution.

Avoiding Traps in Cycles

Bitcoin’s volatility is inherent and also a risk. During any cycle:

• Avoid all-in positions: even with a bullish trend, keep room for risk management.
• Monitor leverage risks: high leverage amplifies cycle swings.
• Watch liquidity: institutional funds are large but can shift quickly.
• Beware of policy black swans: a single ban can instantly alter the cycle.

Looking Ahead to the Next Cycle

Bitcoin’s cyclical nature is well recognized by the market. Future upward cycles are likely to be triggered by:

• Supply constraints from halving events
• Changes in macro liquidity environments (e.g., arrival of rate-cutting cycles)
• Favorable new policies (more countries recognizing Bitcoin)
• Technological breakthroughs (e.g., OP_CAT activation)

Any combination of these factors could ignite the next rally, and early positioning often yields better costs. But remember: history doesn’t repeat exactly, and each cycle has its own unique drivers and risks.

Staying alert to information, maintaining disciplined investing, and regularly reviewing positions are core principles for navigating crypto cycles.