Why Does Bitcoin's Price Rise and Fall in Cycles?

What is the Bitcoin Cycle and Why is it Four Years Long?

Many analysts observe patterns in the price dynamics of the first cryptocurrency that correlate with halvings. These patterns, known as the "four-year cycle," have become a significant psychological factor that often influences trading strategies and the behavior of participants in the crypto industry.

Let’s examine the main phases of a typical market cycle.

Accumulation

The cycle usually begins with the accumulation phase, which follows a crash after the previous price peak. Volatility and network activity decrease, and market sentiment remains neutral or negative.

The name of the phase reflects its essence: long-term investors and major players, considering the asset undervalued, methodically build their positions, as evidenced by on-chain data.

Bitcoin supply dynamics among long-term investors. Source: Bitcoin Magazine Pro.

Retail traders, on the other hand, are typically frightened by deep and prolonged corrections, leading to minimal interest in cryptocurrency during these periods. However, gradual "whale" purchases support a smooth recovery in prices.

Bull Market

The accumulation phase lasts 12–15 months, after which the market transitions to a bull trend.

The rise often begins even before the halving, as the market anticipates the reduction in supply. The expectation of a supply shortage boosts demand: liquidity influx increases, market sentiment improves, and media attention heightens.

Dynamics of new Bitcoin addresses. Source: Bitcoin Magazine Pro.

The halving traditionally triggers parabolic growth: prices rise rapidly, with smooth movements giving way to sharp spikes.

At this stage, retail investors join en masse. The influx of fresh capital drives prices to new all-time highs. In pursuit of quick profits, traders often use high leverage, causing spikes in volatility.

Correction

The bull market lasts from 12 to 18 months and ends with a deep correction. Margin traders are forced to close their positions, altcoins drop sharply, and pessimism prevails—ushering in the bear phase.

During this stage, some market participants are compelled to sell assets at a loss. Corrections alternate with brief rebounds ("dead cat bounces") and exhausting sideways movements.

Over time, panic subsides, and a market bottom forms. Trader activity and excitement drop to a minimum, but ecosystem development continues: developers keep launching new products.

What Causes Sharp Bitcoin Crashes?

In the cryptocurrency market, a crash refers to a sudden and unexpected price drop—when Bitcoin's decline drags down other assets as well.

Throughout its relatively short history, the first cryptocurrency has experienced such episodes multiple times—characterized by high volatility. Short-term corrections are hard to predict, but certain patterns emerge in long-term price dynamics.

There can be many reasons for a crash: on-chain flows, external shocks (wars, changes in key interest rates following emergency Fed meetings). Typically, a combination of several factors leads to it. Sometimes, a simple correction suffices: the price has risen too far and returns to average levels.

Often, a crash is triggered by market overheating due to excessive leverage. Traders take loans expecting prices to rise, and even a small downward movement automatically triggers sell orders to repay the debt. Margin calls are activated, positions are forcibly closed, and selling pressure increases.

This initiates a "cascade of liquidations": short positions weigh on the market, prices fall, leading to further sales. This occurred on January 29, 2026, when weak financial results from tech companies triggered a slight downward movement that escalated into mass liquidations in the cryptocurrency market.

The global macroeconomy also plays a role. When central banks tighten monetary policy or liquidity exits the system, investors reduce their positions in risky assets.

Many market participants view digital gold as a safe-haven asset; however, for most institutional players, it is a high-risk asset. In 2022, when the Fed began aggressively raising interest rates to combat inflation at a 40-year high, Bitcoin lost over 60% of its value within the year.

Dynamics of the US Federal Reserve's key interest rate. Source: TradingView.

Other factors also exert pressure: rumors of bans and restrictions from authorities have historically triggered mass sell-offs. In May 2021, Bitcoin dropped nearly 50% from its April peak after China tightened measures against the mining industry.

Crashes can also occur for other reasons. On October 10, 2025, a wide range of assets fell simultaneously amid reports of 100% tariffs on imports from China.

Dynamics of total cryptocurrency market capitalization excluding the combined market value of the top 10 coins. Source: TradingView.

The market crash triggered a cascade of liquidations, with daily volumes reaching a record $19.3 billion. For the first time in history, Bitcoin recorded a daily candle worth $20,000.

A similar scenario occurred in March 2020: news of the pandemic caused Bitcoin to plummet by 50% within 48 hours as investors rushed to exit risky assets.

What Happens After a Crash?

When Bitcoin falls, many other coins often follow suit. Altcoins typically decline even more sharply, as they are perceived as riskier assets. Meme tokens exhibit particularly volatile swings in both directions during these periods.

A crash flushes speculators and high-leverage supporters out of the market. Often, this is when a bottom forms: investors begin to accumulate positions, and developers resume activity without the frenzy of an overheated market.

The increasing presence of institutional players like BlackRock is changing the industry. Volatility is gradually decreasing, but periodic sharp drops remain an inherent feature of the crypto market.

Historical volatility of Bitcoin compared to Tesla and Nvidia stocks on an annual basis. Source: Charles Schwab.

How is Halving Related to the Four-Year Cycle?

The concept of the four-year cycle is based on halving—a mechanism that directly affects Bitcoin's price.

Every 210,000 blocks, approximately every four years, the reward for miners adding a new block is halved. In 2009, it was 50 BTC, and after four halvings, it has dropped to 3.125 BTC. If this pace continues, issuance will continue until the limit of 21 million coins is reached—around the year 2140.

Bitcoin halving schedule. Source: Bitbo.

This principle was established by Bitcoin's creator, Satoshi Nakamoto, to limit the asset's supply. The first cryptocurrency emerged during the 2008 financial crisis, partly as a response to government bailouts of banks and uncontrolled fiat currency issuance.

The monetary policy of most countries is constantly changing, while Bitcoin operates on a predetermined algorithm with a fixed issuance schedule.

This makes it similar to gold—one of the oldest tools for preserving value. The precious metal appreciates as deposits are depleted, while the scarcity of cryptocurrency is programmed from the start. The lower the influx of new supply, the higher the asset's rarity.

Historically, after halvings, Bitcoin has typically entered a strong bull phase, reinforcing its reputation as an asset with limited supply.

What Were the Previous Cycles Like?

2013

The first Bitcoin cycle was primarily formed within technical circles: internet forums, cryptographic communities, and early enthusiasts. The media narrative of those years was defined by the purchase of two pizzas for 10,000 BTC and the first discussions of cryptocurrency as digital gold.

The main exchange of the era was Mt. Gox: by 2014, it accounted for over 70% of all transactions. In February of that year, the exchange suddenly halted trading—850,000 BTC had disappeared. An investigation later revealed that coins had been stolen from the exchange's wallet since 2011.

In the following year, digital gold lost 85% of its value, only finding a bottom in January 2015.

2017

By 2017, Bitcoin had become a truly mainstream phenomenon. Launched in 2015, Ethereum introduced a wide audience to smart contracts—Ether surged from $10 to $1,400 during this period.

Simultaneously, an ICO mania unfolded: thousands of ERC-20 tokens raised funds often based solely on a white paper. Bitcoin surged from $200 to $20,000 in 2.5 years, capturing the attention of major global media.

The ICO boom was one of the main factors behind the crash: projects that raised funds in Ethereum began actively converting them into fiat currencies, putting downward pressure on prices. The SEC deemed most token sales unregistered securities and began pursuing several issuers—some projects turned out to be outright scams.

Many traders panicked and locked in losses, while high-leverage positions were forcibly closed. Bitcoin crashed by 84%—down to ~$3,200.

2021

This cycle coincided with a period of monetary stimulus: in response to the pandemic, governments worldwide launched massive economic support programs.

Dynamics of the Fed's balance sheet and Bitcoin price. Source: Bitbo.

The increase in global liquidity fueled the bull market. Bitcoin solidified its status as a macro asset: Strategy (formerly MicroStrategy) and Tesla acquired it for billions of dollars, while PayPal and CashApp opened access to buying and selling cryptocurrency.

The "DeFi summer" of 2020 and the subsequent NFT craze attracted a new wave of retail investors. Bitcoin reached $69,000.

The end of the cycle resulted in a chain of bankruptcies. The collapse of the UST stablecoin "wiped out" $60 billion in market capitalization within days. Voyager, Celsius, BlockFi, and Three Arrows Capital could not withstand the pressure—each company was directly or indirectly tied to the collapsed assets and debts of one another.

The final link in the chain was the collapse of the FTX exchange: it was revealed that the platform secretly used customer funds for the benefit of its associated market maker, Alameda Research—both hurriedly sold off assets to settle with users.

Simultaneously, the Fed rolled back stimulus and began raising rates. Bitcoin found its bear market bottom at $15,500.

2025

A defining feature of this cycle was institutional demand. In January 2024, the SEC approved spot Bitcoin ETFs: BlackRock, Fidelity, and VanEck included cryptocurrency in standard investment products. Several companies followed Strategy's model, adding digital assets to their balance sheets—most notably, Japan's Metaplanet.

This cycle was atypical: Bitcoin reached a historic high of $73,000 even before the halving in April 2024. The rise was driven by institutional players, while retail participation remained noticeably lower than in previous cycles.

What Else Explains Bitcoin's Cyclicality?

Cyclicality has other interpretations. One of the most popular is psychology and self-fulfilling prophecies: the price of cryptocurrency is largely determined by narratives, crowd behavior, and market participants' expectations.

Unlike traditional instruments—stocks with dividends or bonds with coupon income—Bitcoin has no intrinsic value in the classical sense. Its price is determined by how much people are willing to pay for it in the future.

With each new cycle, market participants increasingly trade according to its logic—making it more likely to repeat.

Liquidity

Other analysts explain cyclicality through global liquidity dynamics. For instance, BitMEX co-founder Arthur Hayes links key price peaks to monetary policy: the 2013 peak to quantitative easing after the global economic crisis, the 2017 peak to the yen's devaluation against the dollar, and the 2021 peak to monetary stimulus during the pandemic.

Recently, discussions have been fueled by expectations of the end of quantitative tightening and a return to "cheap money" policies with lower rates. Some analysts believe these factors could disrupt the usual patterns in the current cycle.

Retail and Institutional Players

The composition of market participants also plays a significant role in shaping cycles. Institutional investors tend to be disciplined and focused on long-term horizons—they are inclined to buy dips when retail investors sell. Their volumes create price floors and often indicate market bottoms.

Retail investors, in contrast, often act emotionally: they buy on FOMO, chase price momentum, and are more likely to use leverage. Retail activity creates the main volatility within the cycle—especially in the later stages.

Why Do Many Say We Are at the End of the "Bitcoin Cycle Era"?

The main reason is the rise of institutional participation. ETFs, corporate reserves, and hedge funds behave differently than retail investors: they typically buy on a fixed schedule, do not abuse leverage, and strictly control risks. This behavior reduces volatility—and along with it, the amplitude of cycles.

At the same time, Bitcoin is becoming increasingly tied to macroeconomic conditions—interest rates and Fed policy. This weakens the impact of halving on price. The halving occurs strictly every four years, while the Fed has no set schedule.

There is also a diminishing effect of halving itself: the first halving reduced the reward from 50 to 25 BTC, while the latest only cut it from 6.25 to 3.125 BTC. With each iteration, its impact on the market becomes less pronounced.

How Does the Current Cycle Differ from Previous Ones?

In previous cycles, the "parabolic top" typically occurred 12–18 months after halving—and they ended with massive liquidations resulting in drops of over 70%. In the last bull phase, the all-time high was reached before the block reward halving.

Another sign of changing patterns is the increasing dependence of price on global liquidity. The market structure is also important: in the late phases of previous cycles, retail activity surged, and altcoins rapidly appreciated. In recent years, this has not been the case—the tone is set by institutional capital, and the scale of price fluctuations is decreasing.