Why Is the Crypto Bull Run Every 4 Years?

A “crypto bull run” refers to a sustained period where cryptocurrency market prices experience significant increases. This phenomenon often draws in new participants and capital. A common observation is the recurring, roughly four-year cycle for these periods of substantial growth. This article explores the reasons behind this cyclical pattern.

The Bitcoin Halving Event

At the core of the four-year cycle in cryptocurrency markets lies the Bitcoin halving. This mechanism, embedded in Bitcoin’s code, automatically reduces the reward for mining new blocks by half. The halving systematically controls the supply of new Bitcoins entering circulation, fostering scarcity.

The halving’s purpose is to manage Bitcoin’s total supply, capped at 21 million coins, creating a deflationary asset. This contrasts with traditional fiat currencies, which lack a hard limit. By reducing the rate at which new Bitcoins are generated, the halving helps maintain Bitcoin’s value.

Historically, these events occur predictably, approximately every four years, or after every 210,000 blocks are mined. The first halving took place in November 2012, reducing the block reward from 50 Bitcoins (BTC) to 25 BTC. Subsequent halvings occurred in July 2016 and May 2020. Most recently, the fourth halving occurred around April 2024, bringing the block reward down to 3.125 BTC. The next halving event is anticipated around 2028, continuing this pre-programmed reduction in new supply.

The halving directly reduces the rate at which new Bitcoin enters circulation, cutting new supply growth in half. This controlled decrease contributes to a lower inflation rate. This predictable supply shock, occurring consistently every four years, creates fundamental supply-side pressure on Bitcoin’s price.

Supply-Demand Dynamics and Market Psychology

The reduced supply from the Bitcoin halving interacts with market demand. When the supply of a commodity decreases while demand remains stable or increases, its price tends to appreciate. The halving systematically limits the availability of newly minted Bitcoins, creating this scenario.

The halving’s predictable nature fosters powerful market psychology. It generates a narrative of increasing scarcity and potential future price increases, leading to investor anticipation. This anticipation drives speculative buying before and after the event, as participants position for expected price movements.

Rising prices, amplified by media attention, can trigger “Fear Of Missing Out” (FOMO) among retail investors. This phenomenon encourages new money to flow into the market, as individuals do not wish to be left out of potential gains. The belief in Bitcoin’s long-term appreciation, known as “HODL culture,” also encourages existing holders to retain assets, further reducing circulating supply.

These psychological factors contribute to a positive feedback loop. Initial price increases, sparked by the halving’s supply shock, attract more attention and buying activity. This self-reinforcing cycle propels prices higher, creating the rapid ascent seen during bull runs.

Capital Inflows and Macroeconomic Factors

Beyond Bitcoin’s halving and market psychology, cryptocurrency bull runs are influenced by external factors, particularly new capital inflows. The crypto ecosystem attracts capital from retail and institutional investors. Increased accessibility and legitimacy, through user-friendly exchanges and regulated products, facilitate these inflows.

Regulated investment vehicles, such as Bitcoin Exchange-Traded Funds (ETFs), have widened access for investors. ETFs allow exposure to Bitcoin’s price movements within traditional brokerage accounts, simplifying investment for retail and institutional participants and enhancing market liquidity.

Broader macroeconomic conditions also influence investment in speculative assets like cryptocurrency. Low interest rates or quantitative easing, where central banks inject liquidity, can encourage investors to seek higher returns in alternative assets. Inflation concerns in traditional currencies can also drive investors towards perceived stores of value or high-growth opportunities.

Global capital often seeks higher returns, with some liquidity flowing into the cryptocurrency market. While not directly tied to the four-year halving cycle, these external capital flows and broader economic trends magnify the effects of the halving and market psychology. They contribute to a bull run’s overall strength and scale, providing additional momentum.