Author: Arkham
Compiled by: Felix, PANews
Original title: Reviewing Past Bitcoin Bull Markets: Why Did the Four-Year Cycle Occur, and Has It Ended?
Many market observers have described multi-year "cycles" in Bitcoin prices that coincide with Bitcoin halving events. These patterns, collectively known as the "four-year cycle," have become a significant psychological phenomenon influencing the mindset of crypto observers and traders. This article will explore the various phases of the four-year cycle and examine past Bitcoin cycles. Furthermore, it will discuss whether Bitcoin cycles still exist.
A typical four-year cycle
Market observers believe that a standard Bitcoin cycle begins with what is commonly referred to as an "accumulation" phase. They speculate that this phase begins with the crash following the peak of the previous cycle. During this period, price volatility and on-chain activity are relatively low, and market sentiment tends to be neutral or negative. It is called an accumulation phase because long-term Bitcoin holders begin to buy in large quantities. Therefore, the price characteristic of this period is a gradual recovery.
Bitcoin price and long-term holder holdings
On-chain analysis shows that some investors are steadily accumulating Bitcoin, but most retail investors are still wary of the previous crash and are not interested in buying Bitcoin.
The accumulation phase typically lasts 12 to 15 months, during which the market cycle usually enters a new bull market. This usually occurs before the halving, when the price of Bitcoin and other crypto assets begins to rise in anticipation of the halving. The market begins to digest the positive impact of the future supply reduction, and market sentiment begins to shift from neutral to optimistic. Liquidity begins to recover, and media attention increases accordingly.
Bitcoin price and number of new addresses
Once a halving occurs, bull markets often exhibit a parabolic upward trend, with prices climbing, sometimes slowly, sometimes explosively. Retail investors flood the market, and traders begin to pour in large sums of money. Historically, this often results in new all-time highs as a new wave of investors enters the market. Some investors increase leverage to chase the highs, leading to even more volatile price fluctuations.
Historically, bull markets typically last 12-18 months, usually ending with a sharp price drop. Leveraged traders are liquidated, Altcoin suffer even greater losses, sentiment turns negative, and a bear market begins. During this phase of the cycle, many participants sell at a loss and cash out with their remaining funds. Eventually, the dust settles, and a market bottom slowly forms. Since the peak, overall market activity and excitement have significantly decreased, but steadfast builders continue to move forward, and the development of new products and innovations quietly progresses.
Halved
To fully understand the four-year Bitcoin cycle theory, one must first thoroughly understand the concept of halving and its impact on Bitcoin prices.
A Bitcoin halving is a significant event that halves the mining reward (paid in BTC) for adding a new block to the Bitcoin blockchain. This occurs approximately every 210,000 blocks, roughly every four years. In 2009, the reward for adding a new block was 50 Bitcoins per block. This has halved four times since then. The 2024 halving sets the current reward for adding a new block at 3.125 Bitcoins. Assuming this four-year cycle continues, the halving will continue until the total supply reaches its cap of 21 million Bitcoins, around 2140.
Halving is one way Satoshi Nakamoto ensures Bitcoin's scarcity. Bitcoin was created during the 2008 financial crisis, partly to address central bank bailouts and the resulting increase in fiat currency issuance due to inflation. Most governments and their associated fiat currencies are constantly adjusting their monetary policies, making it difficult for holders to build long-term confidence in the value of their currencies.
Bitcoin's halving mechanism mimics gold, making it scarcer. Just as gold becomes increasingly difficult to mine as deposits dwindle, Bitcoin achieves this mathematically. As the new supply of Bitcoin decreases, its scarcity increases. Historically, Bitcoin's price has typically risen with each halving, driven by supply and demand. Therefore, some proponents argue that the transparency and consistency of halving make Bitcoin a powerful store of value.
Review of previous cycles
2013
Bitcoin was created in 2008, and 2013 marked its first cycle. It was primarily driven by the tech community at the time, such as internet forums and cryptography meetups. This cycle also garnered some early media attention, with coverage focusing on topics such as the first real-world transaction using Bitcoin (buying two pizzas with 10,000 Bitcoins) and "Is Bitcoin digital gold?".
During this period, Mt. Gox was the largest Bitcoin exchange. In 2014, Mt. Gox processed over 70% of global Bitcoin transactions. However, in 2014, Mt. Gox suspended trading and shut down its website, subsequently revealing the loss of 850,000 Bitcoins. Because Mt. Gox was a major source of Bitcoin liquidity, this event caused a sharp decline in market confidence in Bitcoin, resulting in an 85% price drop and the onset of a bear market.
2017
2017 marked a period of Bitcoin's adoption by retail investors. With the launch of Ethereum in 2015, smart contracts and their revolutionary potential entered the public eye. Ethereum's price surged from $10 to $1400 during this period. This era was also known for the ICO frenzy, with thousands of ERC-20 tokens launched, attracting investors simply by providing a white paper. Bitcoin also experienced a price explosion due to the influx of new investors, soaring from $200 to $20,000 in two and a half years. The industry was frequently covered by mainstream media (see above).
Ultimately, the ICO craze that had driven Bitcoin's price surge became the catalyst for the crash. In ICOs, investors exchanged their Ethereum or Bitcoin for the cryptocurrency of new projects. Many project teams, after accumulating large amounts of Ethereum, began selling these tokens for cash, creating selling pressure. The U.S. SEC also began cracking down on ICOs, labeling them "unregistered securities offerings" and filing lawsuits against numerous projects, many of which were Ponzi schemes and frauds. In this environment, over-leveraged investors either panicked and sold off or were forced to sell as prices began to plummet, causing Bitcoin's price to plunge 84% to $3,200.
2021
The 2021 Bitcoin cycle coincided with a surge in money supply during the COVID-19 pandemic. Governments worldwide sought to revive economies stalled by the pandemic, with fiscal stimulus becoming a key solution. This surge in global liquidity propelled Bitcoin to new highs in 2021. Another characteristic of this cycle was Bitcoin's transformation from an "internet currency" to a more significant "macro asset." Companies like Strategy and Tesla purchased billions of dollars worth of Bitcoin, while payment apps such as PayPal and CashApp began supporting Bitcoin transactions. The DeFi boom of 2020 and the NFT boom of 2021 attracted a large number of retail investors to this cycle. Both retail and institutional investors collectively drove up cryptocurrency prices, with Bitcoin reaching a high of $69,000.
The end of this Bitcoin cycle stemmed from the collapse of several prominent protocols and companies within the industry. First, the Luna stablecoin UST de-pegged, wiping out $60 billion in value in a short period. Companies and institutions such as Voyager, Celsius, BlockFi, and Three Arrows Capital, with their direct or indirect exposure to Luna, bets on market direction, and interconnections, ultimately went bankrupt. BlockFi subsequently restructured and obtained a line of credit from FTX. Ultimately, with the collapse of FTX, BlockFi also declared bankruptcy.
FTX and its affiliated trading platform Alameda were found to have engaged in massive fraud, forcing them to liquidate assets to repay users. The US federal government also ended its stimulus monetary policy and began significantly raising interest rates, causing a drain on market liquidity. All these events contributed to the plunge in Bitcoin's price, which fell to $15,500 at the bottom of the bear market.
2025
The current 2025 cycle has witnessed increased institutional adoption, with major traditional financial institutions entering the space. A spot Bitcoin ETF was approved in January 2024, and companies like BlackRock, Fidelity, and VanEck began offering Bitcoin as a standard investment product. Many companies have also adopted Strategy's Digital Asset Reserve (DAT) model, incorporating cryptocurrencies into their balance sheets. This cycle is unique in that Bitcoin reached a new high of $73,000 before the April 2024 halving. Furthermore, institutions have become the primary price driver, while retail participation has not yet reached the levels of previous cycles.
Why do cycles occur?
Inventory flow ratio
There are several potential reasons for the occurrence of Bitcoin's four-year cycle. One common explanation relates to the stock-to-flow ratio (S2F), a model often used to measure the scarcity of commodities such as gold and silver.
This model compares stock (existing supply) and flow (annual new supply). The higher the ratio, the scarcer the asset. S2F is applied to Bitcoin because its total supply is fixed, and mining rewards are distributed at fixed intervals. Each halving doubles Bitcoin's stock-to-flow ratio as the new supply is halved. Currently, Bitcoin's stock-to-flow ratio is approximately 110, while gold's is approximately 60, making Bitcoin a scarcer asset under the stock-to-flow ratio model.
Psychological factors
Another simple explanation involves psychology and self-fulfilling prophecies. Bitcoin prices are heavily influenced by narratives, herd behavior, and expectations of the future. Because Bitcoin doesn't have intrinsic value like traditional financial assets, its value largely depends on people's expectations of its future worth. Therefore, Bitcoin prices are highly reflective and more sensitive to halving expectations, rumors, and narratives. Since the four-year Bitcoin cycle has played out multiple times, investors tend to trade Bitcoin based on past cycle movements, thus creating a kind of self-fulfilling prophecy.
Liquidity
Others argue that Bitcoin's cycles are primarily dependent on global liquidity. BitMEX founder Arthur Hayes, in his article "Long Live The King," points out that Bitcoin's four-year cycles are directly related to global liquidity, emphasizing the influence of the US dollar and the Chinese yuan. Hayes explains that the 2013 peak was caused by increased money supply following the 2008 financial crisis, the 2017 peak by the depreciation of the yen against the dollar, and the 2021 peak by increased money supply following the COVID-19 pandemic.
Recently, amid discussions surrounding the end of quantitative tightening (QT, where the Federal Reserve reduces the amount of assets on its balance sheet to lower liquidity), the resumption of quantitative easing, and declining interest rates, some have claimed that the Bitcoin cycle in 2025 will not follow the previous pattern.
Retail investors and institutions
The positions held by retail and institutional investors also play a significant role in driving Bitcoin cycles. Institutional investors are typically more disciplined and have longer investment horizons, thus buying during periods of panic and forming market bottoms. Retail investors, on the other hand, are more emotional and more prone to buying due to FOMO (fear of missing out). Therefore, retail investors are more likely to chase price momentum and use leverage. Retail investors often cause greater volatility during cycles, especially in the later stages.
Why do some people say the cycle is over?
There are several reasons why people claim the Bitcoin cycle is over. One major reason is increased institutional participation through ETFs, corporate treasuries, hedge funds, and other financial entities. These entities behave differently from retail investors, buying on a fixed schedule, using reasonable leverage, and carefully managing risk. This behavior suppresses volatility, thus mitigating cyclical fluctuations.
Another potential reason is the significant growth of cryptocurrencies in earlier cycles. Bitcoin is increasingly linked to macroeconomic factors such as interest rates and Federal Reserve policy, diminishing the impact of halvings on Bitcoin's price. Halvings occur every four years, while Federal Reserve policy does not have a similar fixed schedule. Furthermore, the importance of halvings themselves is decreasing as their impact on block rewards gradually diminishes. The first halving reduced the reward from 50 BTC to 25 BTC, while the most recent halving reduced it from 6.25 BTC to 3.125 BTC.
How to determine if a cycle has ended?
Closely monitoring the current cycle's development can help in better determining whether the four-year cycle is now history. Some key signs that may indicate this are:
Historically, price spikes have typically occurred after a halving, usually within 12-18 months.
In the past, these cycles all ended with massive leverage liquidation and chain reactions of liquidation, resulting in a drop of over 70%.
If Bitcoin's price begins to perfectly align with changes in global liquidity, then Bitcoin will become a macro asset, rather than an asset based on halving cycles.
Historically, a surge in retail investor participation has occurred in the later stages of such cycles, leading to parabolic price increases for Altcoin. Insufficient retail participation suggests that the cycle is primarily driven by institutional buying, which may result in reduced volatility and a flatter cycle.
in conclusion
Bitcoin has long followed a four-year cycle. It slowly recovers from a bear market, enters a halving phase, then surges in price before rapidly declining due to losses incurred by leveraged traders. Historically, numerous factors have contributed to this phenomenon, ultimately forming the familiar four-year cycle. Despite this, Bitcoin has steadily grown into its current behemoth with a market capitalization of $1.8 trillion. The emergence of institutional investors, ETFs, and sovereign wealth funds signifies a significant shift in market participants compared to the first cycle. Bitcoin appears increasingly sensitive to macroeconomic factors, but its price movements are still influenced by some traditional factors, such as psychological factors and the mining economy.
It remains unclear whether Bitcoin's cycle has completely ended, but each cycle is unique, and future cycles could very well be drastically different from the past. Understanding the historical evolution of this asset and its participants is key to understanding future cycles, but ultimately, only time will tell whether this pattern will continue or become a relic of the past.
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