Crypto market cycle decoded: From the birth of Bitcoin to a market capitalization exceeding a trillion, 6 major phases and multi-dimensional driving mechanisms.

Since the birth of the Genesis Block of Bitcoin in 2009, blockchain technology has ushered in a new era of decentralized digital currencies. Over the past decade, the cryptocurrency market has fluctuated like the tides, with dramatic price volatility yet hidden patterns. This journey from nothing to a market capitalization in the trillions has been filled with fervent bull runs and profound bear markets. These seemingly chaotic rises and falls are, in fact, closely linked to a series of key events and macro forces. This article will delve into the development trajectory of Bitcoin from 2009 to 2025, dividing it into six major stages, and reveal the multi-dimensional mechanisms driving these cyclical changes, exploring the internal logic and future direction of the cryptocurrency market.

Phase One (2009-2016): Initial Market Exploration and Technological Foundation

At the beginning of Bitcoin's birth, it was just a niche toy for geeks and an experimental field for cryptography enthusiasts. From 2009 to early 2013, its price remained sluggish. However, in 2013, Bitcoin's price experienced its first dramatic fluctuation, skyrocketing from around $20 at the beginning of the year to over $1,100 by the end of the year, followed by a sharp decline. This rollercoaster-like market situation brought Bitcoin into the global spotlight for the first time.

Driving Factors:

The banking crisis in Cyprus triggered a demand for hedging: In March 2013, the Cypriot government announced a tax on bank deposits, leading to bank runs and market turmoil, which profoundly exposed the vulnerabilities of the traditional financial system. The decentralization of Bitcoin made it widely regarded for the first time as a potential hedging asset, gaining unprecedented market attention.

Preliminary Understanding of Regulatory Policies: On November 18, 2013, relevant U.S. government agencies held a special hearing on the risks and threats of Bitcoin and other virtual currencies, publicly acknowledging the legitimacy of Bitcoin for the first time. The clarity of the regulatory attitude ignited market enthusiasm, with Bitcoin's price skyrocketing over 114% in a single day.

Mainstream media widely reported: In 2013, Bitcoin completely "broke the circle," breaking away from the tech geek community and becoming the focus of global mainstream media, greatly stimulating public investment interest and speculative enthusiasm.

Reasons for Downtrend:

Regulatory risks emerge: The rise of the dark web (such as Silk Road) forces regulatory agencies to face the potential dangers of crypto assets. The FBI seized the first generation of "Silk Road" in October 2013, sending a clear message to the market: Bitcoin is not outside the law.

China Strengthens Regulation: On December 5, 2013, the People's Bank of China issued a notice on preventing the risks of Bitcoin, prohibiting financial institutions from providing services related to Bitcoin, which led to a significant short-term drop in Bitcoin prices.

Crisis of Trust in Exchanges: On February 28, 2014, Mt.Gox exchange announced bankruptcy, with a large amount of Bitcoin lost, triggering widespread concerns about the security and regulation of exchanges globally, and leading to a further fall in Bitcoin prices.

Stage Characteristics: The decentralization feature of Bitcoin is significantly manifested in the first stage, with its anti-censorship and independent sovereignty verified in the real world. At the same time, the early immature ecosystem has also exposed its vulnerabilities in terms of regulatory absence.

Phase Two (2016-2018): ICO Frenzy and Regulatory Impact

Driving Factors:

Ethereum Mainnet Launch: On July 20, 2015, the Ethereum mainnet was launched, introducing smart contracts and a decentralized application framework that expanded blockchain technology from a single payment scenario to a whole ecosystem including finance, gaming, social interactions, marking the official start of the value Internet technology revolution.

Bitcoin's second halving: On July 9, 2016, the second block reward halving occurred, with expectations of scarcity and incremental funds brought in by the Ethereum ecosystem jointly driving the market out of the trough.

ICO market explosion: With the maturation of Ethereum smart contract technology, the global ICO market experienced explosive growth in 2017, with total financing reaching 4.6 billion USD and market participation significantly increased. This is due to ICOs providing a financing channel that bypasses traditional IPO scrutiny, as well as the allure of low barriers for general investors to participate in early projects.

Reasons for the Downtrend:

Market expansion accompanies systemic risks: ICO projects generally lack information disclosure mechanisms and qualification review standards, with unclear regulations on fundraising scale and circulation methods. In the absence of regulation, the scope of financing expands in a disorderly manner.

Strict Regulation and Market Turning Point: On September 4, 2017, the People's Bank of China and seven other ministries jointly issued a notice on preventing risks of token issuance and financing, explicitly defining ICOs as illegal public financing and requiring domestic cryptocurrency exchanges to cease trading, resulting in a cliff-like drop in virtual currency market trading volume and a plummet in Bitcoin prices.

Stage Characteristics: The technological innovations of Ethereum have driven explosive market growth, but the lack of macro regulation has led to the accumulation of risks. This process reveals the bidirectional effect of macro dynamics, where technology and innovation provide momentum for market growth, while the restructuring of the regulatory system guides the direction of market corrections.

Stage Three (2018-2020): Market Clearance and Institutional Breakthrough

Driving Factors:

Deep Correction and Market Clearance: After the ICO bubble burst in 2017, the Bitcoin market entered a deep retracement period in 2018, accompanied by the bankruptcy and liquidation of numerous projects, with prices continuously under pressure. By early 2020, the price of Bitcoin remained in the $10,000 range.

Institutional Involvement:

On June 18, 2019, Facebook officially released the Libra stablecoin white paper, attempting to build a global digital currency payment network.

On January 21, 2020, the Grayscale Bitcoin Trust completed its registration with the U.S. Securities and Exchange Commission (SEC), becoming the first cryptocurrency investment vehicle regulated by the SEC, providing a compliant entry channel for institutional capital.

On August 11, 2020, Strategy Company purchased 21,454 Bitcoins for $250 million, fundamentally changing the way businesses think about financial management.

Stage characteristics: The third stage is a critical period for market self-repair and transformation. In the bear market following the ICO bubble burst, inferior projects are eliminated. The entry of physical institutions provides a regulatory path for the crypto market and lays the groundwork for the next stage of market explosion.

Stage Four (2020-2022): DeFi Expansion, NFT Explosion, and Regulatory Divergence

Driving Factors:

The DeFi ecosystem is experiencing exponential growth: Driven by the composability innovation of Ethereum smart contracts, decentralized finance (DeFi) entered an explosive phase in the summer of 2020, with the total value locked (TVL) skyrocketing from approximately $15 billion at the beginning of 2021 to a peak of nearly $180 billion by the end of the same year, achieving an annual growth rate of up to 1100%. Infrastructure projects such as Compound, Uniswap, USDT, ChainLink, and Synthetix have emerged.

NFT Market Explosion: The non-fungible token (NFT) market has transitioned from a technical experiment to a mainstream consumer scenario. Through the ERC-721/1155 standards, the uniqueness and rights of digital content on the blockchain have been established, giving rise to trillion-dollar emerging markets such as artwork, collectibles, and virtual real estate.

Supervisory Divergence:

China: In May 2021, the State Council's Financial Stability Development Committee clearly required to "severely crack down on Bitcoin mining and trading activities." In September of the same year, the central bank and ten other ministries issued a notice on "further preventing and handling the speculative risks of virtual currency trading," defining virtual currency-related businesses as "illegal financial activities" and completely banning the provision of services within the country.

El Salvador: On June 8, 2021, the Legislative Assembly of El Salvador voted to establish Bitcoin as an unrestricted legal tender, becoming the first country to officially adopt crypto assets.

United States: On October 15, 2021, the U.S. Securities and Exchange Commission (SEC) approved ProShares Bitcoin futures ETF (ticker: BITO) for listing on the New York Stock Exchange, marking the first acceptance of crypto assets derivatives by the traditional financial system.

Stage Characteristics: Technological innovation drives unprecedented market prosperity, but after the peak of the bull market, the pressure for regulatory adaptive reconstruction significantly increases, and the regulatory paths of various countries show obvious differences.

Fifth Stage (2022-2024): Black Swan Impact and Governance Restructuring

Reasons for Decline:

Series of Risk Events and Deep Recession: Under the impact of consecutive risk events such as the collapse of LUNA, the bankruptcy of Celsius, and the closure of FTX, the cryptocurrency market fell into deep stagnation in 2023. The price of Bitcoin has been continuously declining since the end of 2022 and had fallen below 20,000 USD by the beginning of 2023.

The collapse of the Terra ecosystem: In May 2022, it led to a severe decoupling of its algorithmic stablecoin UST, triggering a systemic reflection on the economic model of decentralized stablecoins.

Crypto lending institution Celsius filed for bankruptcy: In July 2022, it filed for bankruptcy, forcing regulators to accelerate the development of regulatory requirements for lending platforms.

FTX Exchange Bankruptcy: In November 2022, it triggered a crisis of trust in exchanges, becoming a black swan that undermined market confidence and prompted reflection and improvement within the industry.

Stage Characteristics: A series of black swan events reveal issues in the industry regarding risk management, transparency, and governance, leading the market into a Bear Market, forcing painful yet necessary liquidations, and promoting the industry's reflection and upgrade on safety, transparency, and regulatory compliance.

Stage Six (2024-2025): System Breakthrough and Macro Narrative Resonance

Driving Factors:

Market Recovery and Historic Breakthrough: Driven by regulatory compliance and a shift in monetary policy, the Crypto Assets market achieved a historic breakthrough in 2024, with Bitcoin's price first surpassing the $100,000 mark. Ethereum significantly enhanced Layer2 scalability through the Cancun upgrade, and the Meme Coins sector also exhibited explosive growth.

Approval of US Spot ETFs: In January 2024, the US Securities and Exchange Commission (SEC) approved the listing of 11 BTC spot ETFs, leading to a substantial influx of traditional institutional funds into the crypto market. In May of the same year, Ethereum spot ETFs were approved.

Federal Reserve Cuts Interest Rates: In September 2024, the Federal Reserve cut rates by 50 basis points for the first time in four years, prompting funds to move from traditional markets to high-risk assets, injecting significant liquidity into the Crypto Assets market.

Trump elected as President of the United States: In November 2024, Trump's public support for crypto assets drove the price of Bitcoin to break through $100,000.

Stage characteristics: Institutional breakthroughs resonate with macro policies and political narratives, driving the market into a new growth cycle led by institutions and more compliant.

Summary:

In several price surge cycles of Bitcoin, we can glimpse the operational patterns of the crypto assets market. The crypto assets market follows a cyclical characteristic of "technological innovation explosion → market speculation frenzy → regulatory intervention → market deep adjustment → underlying technology iteration." Among these, the factors influencing the market are diverse and interrelated, with core factors including the following aspects:

Technological Innovation and Ecological Development: Continuously expanding application scenarios such as Ethereum smart contracts, DeFi protocols, NFTs, and GameFi are one of the core drivers attracting funds and users. At the same time, Bitcoin's halving policy every four years has long supported upward price expectations by reducing supply.

Market sentiment and speculative drive: The emergence of a new narrative, the development of technology and ecology, coupled with the rise in coin prices, has amplified users' FOMO emotions, triggering a speculative frenzy that pushed prices higher.

Regulatory policies and compliance processes: Policy changes directly affect market confidence and capital flow. Strong regulation has suppressed the market in the short term, but compliance has ultimately cleared the barriers for large institutional capital to enter the market, promoting the standardization and mainstreaming of the market.

Institutional and capital entry: Grayscale Trust, MicroStrategy, spot ETFs and other channels have lowered the entry threshold for traditional capital, and their large-scale influx provides stability endorsement and continuous liquidity for the market.

Macroeconomic and Political Environment: Global monetary policy, geopolitical risks, significant political events, and the policy tendencies of leaders have significantly amplified market fluctuations, with cryptocurrencies increasingly showing their potential as macro hedging tools.

Black Swan Events and Market Corrections: Events such as the Mt.Gox collapse, LUNA shutdown, and FTX bankruptcy have triggered a crisis of confidence and Bear Market corrections. However, the crisis has also prompted the market to reflect, eliminate poor-quality projects, and promote improvements in security, transparency, and governance standards, laying the foundation for the next round of healthy development.

At the same time, we can find:

The cryptocurrency market follows a spiral cycle, each cycle eliminates inferior projects and ecosystems, and precipitates high-quality value.

The breakthrough of Blockchain technology and the expansion of the ecosystem are the core engines for the long-term value growth of the Crypto Assets market.

Regulatory policies are a double-edged sword for market development, and the ultimate compliance process (such as spot ETFs) is the necessary path to attract institutional capital and achieve mainstream adoption, marking a leap in market maturity.

The impact of global macroeconomics, monetary policy, and geopolitics on the fluctuation of the crypto assets market is becoming increasingly significant, and its macro attributes as a new asset class are being strengthened.

Although black swan events cause short-term pain, they objectively accelerate the standardized development of the industry in terms of security, transparency, and governance.

Conclusion:

Standing at the starting point of the new cycle in 2025, the tokenization of real-world assets (RWA) has become a bridge connecting traditional finance with the on-chain ecosystem, signaling that the market focus may shift from speculative frenzy to more substantial value creation. In the foreseeable future, the cryptocurrency market will enter a new era driven by institutional innovation and continuous technological breakthroughs.