Bitcoin's Evolving Cycles: Is the Volatility Over?

Bitcoin's price cycles, once characterized by dramatic bull and bear markets, may be undergoing a fundamental shift. Analysis suggests the classic cycle theory might be outdated, thanks to the growing influence of institutional investors and Exchange-Traded Funds (ETFs).

Resemblance to Past Cycles, Yet a Divergence

While the current Bitcoin cycle shows similarities to the 2017 and 2021 cycles, key differences are emerging. Historically, long-term holders (LTHs) accumulated during bear markets and sold during bull runs, creating predictable bowl-shaped patterns. The current cycle, however, displays a slower, less symmetrical distribution pattern.

• Past Cycles: Clear accumulation and distribution phases leading to significant price swings.
• Current Cycle: Slower, less predictable price movements, indicating a change in market dynamics.

The Impact of ETFs and Institutional Investment

Many analysts attribute this shift to increased institutional adoption of Bitcoin, particularly following the approval of U.S. spot ETFs in early 2024. This influx of institutional capital may be smoothing out the extreme volatility seen in previous cycles.

CryptoQuant founder Ji Young Ju, after initially mispredicting the market, now suggests the traditional cycle theory may no longer apply. He cites the increased uncertainty surrounding liquidity and volume as evidence of Bitcoin's integration with traditional finance (TradFi).

“It feels like it’s time to throw out that cycle theory. New liquidity sources and volume are becoming more uncertain, signaling a transition as the Bitcoin market merges with TradFi.”

Reduced Volatility and Returns

Since the April halving, Bitcoin has seen a 70%+ rally, rising from $63,000 to over $109,000. However, this pales in comparison to the 354% increase in 2020-2021 and the over 500% gain in 2017. The compounded annual growth rate (CAGR) has also declined significantly, from over 850% in 2015 to around 30% in May 2025.

This decrease in returns correlates with a reduction in volatility. Since the launch of U.S. spot ETFs, annualized 30-day volatility has dropped from 78% to 35%.

The Future of Bitcoin's Price

While Bitcoin remains a strong investment on a risk-adjusted basis compared to traditional assets, its massive upside potential may be diminishing as it matures and becomes more integrated with TradFi. The reduced volatility suggests a shift towards a less dramatic, more stable market.

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