Why do gold and Bitcoin keep rising: The mystery of the 4-year cycle

Since the 2008 financial crisis, gold prices have risen from about $400 per ounce to over $1800 today, with a cumulative increase of more than 300%. During the same period, Bitcoin surged from $0.01 to the current $89,990, with an even more astonishing increase. Why are these two assets, both regarded as stores of value, continuously rising? The answer perhaps lies in the law of scarcity they both follow—Bitcoin has perfected this principle through a clever 4-year cycle mechanism.

Commonality Between Gold and Bitcoin: Scarcity Drives Value

To understand why Bitcoin keeps rising, first understand why gold has also been rising. Gold has been regarded as a symbol of wealth for thousands of years mainly because of its scarcity—limited reserves on Earth and increasing difficulty in mining. As easily accessible gold depletes, the new supply continues to decline, allowing gold to maintain its value in the face of inflation and economic uncertainty.

Bitcoin’s creator, Satoshi Nakamoto, in 2009, designed Bitcoin with this very characteristic of gold in mind. Bitcoin is not issued by any central bank but is mathematically programmed to ensure its total supply never exceeds 21 million coins. This hard cap on supply makes Bitcoin the “Gold 2.0” of the digital age.

According to the Stock-to-Flow (S2F) model—a classic indicator used to measure scarcity of commodities like gold and silver—Bitcoin’s S2F ratio is about 110, while gold’s is 60. This means Bitcoin’s scarcity is even higher than gold’s. The secret to Bitcoin’s ability to ensure this increasing scarcity lies in the halving events that occur every four years.

The 4-Year Cycle of Bitcoin: How Supply Reduction Drives Prices

Bitcoin halving refers to the automatic reduction of mining rewards every four years. In 2009, the reward was 50 BTC per block; after four halvings, it will be 3.125 BTC by 2024. This cycle is expected to continue until around 2140, when the total supply reaches 21 million coins.

From an economic perspective, halving directly increases Bitcoin’s S2F ratio. Each halving halves the new supply, while the stock remains unchanged, effectively doubling scarcity. Anticipation of this supply drop prompts investors and traders to buy, creating a self-reinforcing cycle of “bullish → buy → price increase.”

This cycle generally divides into four stages:

Accumulation Phase (about 12-15 months): After the previous cycle’s high, the market is subdued, retail investors exit at a loss, but long-term holders begin accumulating. On-chain analysis shows professional investors quietly stockpiling.

Expectancy Phase (6-12 months before halving): The market starts digesting the supply tightness caused by halving. Media attention increases, new investors enter, and market sentiment shifts from neutral to optimistic.

Explosion Phase (12-18 months after halving): Post-halving, new supply drops significantly. Retail investors flood in, driven by FOMO (Fear of Missing Out). This phase often sets new all-time highs, with leveraged traders amplifying the move, leading to parabolic price rises.

Correction Phase (end of the cycle): Over-leverage causes chain liquidations during risk events. Traders are forced to close positions, leverage unwinds, and prices fall rapidly, entering the next bear market.

Historical Validation: How the Cycle Played Out from 2013 to 2025

2013 First Cycle: Bitcoin entered public consciousness driven by the tech community. Mt. Gox was the main exchange, but in 2014, 850,000 BTC were stolen, crushing market confidence and causing an 85% drop.

2017 Second Cycle: Ethereum launched, igniting ICO frenzy. Bitcoin soared from about $200 over two and a half years to $20,000. But scams and regulatory crackdowns led to an 84% crash to $3,200.

2021 Third Cycle: During the COVID-19 pandemic, global central banks engaged in massive monetary easing. Companies like MicroStrategy and Tesla bought large amounts of Bitcoin; PayPal and CashApp supported trading. Bitcoin hit a record high of $69,000. However, UST stablecoin de-pegged, triggering chain liquidations; FTX fraud collapsed; Fed started raising interest rates, and Bitcoin fell to $15,500.

2024-2026 Current Cycle: Institutional participation surged. In January 2024, spot Bitcoin ETFs were approved, with giants like BlackRock, Fidelity, and VanEck entering. Bitcoin hit a new high of $73,000 before the April 2024 halving, and by the end of 2025, it broke previous records, currently trading around $89,990, with an all-time high of $126,080.

Why Do Cycles Occur? Multi-Dimensional Analysis

Liquidity and Macroeconomics: Arthur Hayes, founder of BitMEX, points out that Bitcoin cycles are closely related to global liquidity. The 2013 peak was driven by monetary expansion post-2008; 2017 by Yen depreciation; 2021 by excess liquidity post-pandemic. This indicates that, despite the 4-year halving cycle, macroeconomic policies have a greater influence on Bitcoin’s price.

Psychology and Self-Fulfilling Prophecy: Bitcoin lacks intrinsic value and mainly depends on expectations. Since the 4-year cycle has been repeatedly validated, investors tend to trade based on these expectations, creating self-fulfilling prophecies. This strong reflexivity means narratives, rumors, and expectations significantly impact prices.

Participant Structure Changes: Retail investors are emotional, leverage-happy, and prone to chasing gains and panic selling; institutional investors are disciplined, long-term, and risk-managed. As institutions enter, market volatility begins to be suppressed.

Institutional Influx: New Players Changing the Game

Traditional 4-year cycles were driven mainly by impulsive retail investors. They tend to buy on FOMO and sell in panic, causing extreme volatility—often over 300% gains and over 70% drops.

But recent years have seen changes. ETF listings, corporate holdings on balance sheets, participation by pension funds and insurers have altered the market structure. These institutional investors:

• Use reasonable leverage rather than extreme leverage
• Follow fixed schedules rather than impulsive trading
• Hold for years rather than chase short-term swings
• Focus more on macroeconomic factors than halving events

What’s the result? Market volatility is suppressed, extreme swings are less frequent. Currently, Bitcoin’s correlation with Federal Reserve policies and the dollar index has increased, while its correlation with halving cycles has decreased.

Is the Cycle Dead? Standard for Judgment

To determine if the 4-year cycle remains valid, observe these signals:

Signal 1: Will extreme price surges still occur? Historically, within 12-18 months after halving, Bitcoin has risen 200-300%. If such extreme gains disappear, the cycle may have changed.

Signal 2: Will crashes still happen? Traditional cycles end with declines over 70%. If future corrections are only 20-30%, it indicates better risk management by institutions.

Signal 3: Retail participation. Past cycles saw parabolic rises with retail participation surging. Currently, retail involvement is below historical levels, suggesting weakening cycle characteristics.

Signal 4: Macro influence. If Bitcoin’s price is entirely driven by Fed policies, inflation, and exchange rates, it has become a macro asset, and the influence of halving cycles diminishes.

Gold’s Lessons and Future Outlook

Why has gold kept rising? Because its scarcity is increasing. Why has Bitcoin also kept rising? For the same reason, but with an added acceleration mechanism via the 4-year cycle.

However, as Bitcoin matures, its cycle features may be evolving rather than disappearing. Gold’s price volatility has become relatively mild, mainly driven by macro factors like real interest rates and the dollar index, rather than supply shocks. Bitcoin may be heading toward a similar mature path.

The current features of the 2026 cycle—institutional dominance, low retail participation, high correlation with macro policies—suggest Bitcoin may be transitioning from a “cyclical asset” to a “macro asset.” This is not the end of the cycle but its evolution.

Future Bitcoin may resemble gold: still rising due to supply tightness, but with more moderate gains; corrections will still occur, but extreme volatility will be rare. The logic of scarcity will never change, but the way this scarcity manifests as price appreciation is being reshaped.