Bitcoin Price Phases:
Navigating Bitcoin’s Volatility Trends

It is often said that the trend is your friend—and like an undercurrent beneath calm waters, volatility plays a key role in understanding bitcoin’s price trends. These trends follow cyclical patterns, with fluctuations in profit and volatility offering a unique perspective on the ever-changing landscape of bitcoin.

This blog explores the concept of bitcoin price phases and explains how analyzing bitcoin through the lens of the percentage of addresses in profit and one-year realized volatility can help highlight prevailing trends. Through this analysis, investors can glean new insights into bitcoin’s current environment and the direction it may take in the future. 

Defining the Environment

There are many ways to identify and analyze “phases” in financial markets. This blog uses a framework that divides bitcoin’s environment into four regimes, or phases, based on two variables: profit and volatility.

Understanding bitcoin price phases begins with defining when profit and volatility are considered high or low. For this analysis, the percentage of addresses in profit is classified as high when it exceeds 95% and low when it falls below this threshold.

Alternatively, high and low volatility can be measured using percentiles, allowing for more accurate comparisons over time. This analysis applies the fifth percentile of all one-year realized volatility data from July 19, 2010, to February 4, 2025. Bitcoin’s realized volatility is classified as low on any given day if it falls below this fifth percentile and high if it exceeds it.

This approach seeks to identify patterns between profit and volatility in bitcoin’s market, providing insights into whether the overall environment is bullish or bearish. For example, a uniquely low-volatility and high-profit environment could suggest stability for bitcoin and a bullish shift in the market. The following chart outlines the four distinct price phases that can emerge in bitcoin’s market:  

Bitcoin Price Phases

These phases have historically followed a consistent pattern unless disrupted by significant global events such as a pandemic or major conflict. The four phases are defined as follows:

Reversal Phase

The Reversal Phase marks the beginning of a new cycle, characterized by bitcoin’s price rapidly declining from the previous cycle’s highs. Defined by high volatility and a low percentage of addresses in profit, this phase signifies the abrupt onset of a bear market and is often a challenging time for bitcoin holders. The Reversal Phase is followed by the Bottoming Phase.

Bottoming Phase

The Bottoming Phase represents a quiet period following the turbulence of the Reversal Phase. It begins with a shift from high to low volatility, alongside the continuation of a low percentage of addresses in profit.

During this phase, many investors have sold their bitcoin and rotated into other assets. Global on-chain Bitcoin activity and sentiment are subdued, with only steadfast holders or those committed to building in the Bitcoin ecosystem remaining. Price begins to gradually recover, which signals the transition into the Appreciation Phase. 

Appreciation Phase

The Appreciation Phase represents a time of renewed optimism for bitcoin as an investable asset. Prices recover to a profitable range, and innovative ideas that were forged during the bear market are implemented. 

This phase is characterized by sustained low volatility and a shift from a low to high percentage of addresses in profit. During this phase, bitcoin often reaches a new all-time high in price after an extended time below previous peaks. The Appreciation Phase also serves as a validation for the asset, distinguishing it from being a temporary fad or bubble. It is the shortest phase in the cycle, as all-time highs inevitably give way to increased volatility seen in the Acceleration Phase.

Acceleration Phase

The Acceleration Phase marks a time of excitement. Bitcoin’s price enters a discovery phase, with investors focusing closely on its daily movements. During this phase, bitcoin also attracts substantial attention from both supporters and detractors. The Acceleration Phase is defined by high volatility and high profit, as investors push the price to its cycle peak. This phase concludes with an abrupt retreat into the Reversal Phase, marking the beginning of a new cycle.

Below is a chart of bitcoin’s price overlaid with these four phases from 2010 to present day. Throughout this blog, color coordination will indicate levels of volatility and profit. Light and dark shades represent low or high volatility, while red/orange and green will signify low or high profit.  

Bitcoin price phases reflect instances of high or low profit and volatility over the long term. These metrics exhibit a cyclical pattern, offering investors insights into the present market conditions and potential future trends.  

The graphic “Bitcoin’s Price Phases” illustrates how each phase transitions into the next, driven by shifts in either profit or volatility. Specific changes in these metrics within a given phase serve as signals that bitcoin may be approaching a shift. The more these signals appear, the stronger the case for an impending transition becomes.

Under standard circumstances, there is rarely a single day or abrupt shift that definitively indicates bitcoin’s price is moving from one phase to the next. Instead, gradual changes in metrics accumulate over time until bitcoin fully enters a new phase. Each day that metrics align with the next phase strengthens the overall probability that a shift is underway. The resulting data can be used retrospectively to map out when each phase likely started or ended. However, it is important to note that this is an exercise of probabilities shifting and not exact timing. 

These price phases have historically followed the same sequential order during each cycle under typical market conditions. The one exception to this pattern was the disruption caused by the COVID-19 pandemic in March 2020. To date, no other global event has had a comparable impact on bitcoin’s price cycles.

A Closer Look Into 2024

On February 26, 2024, bitcoin experienced its first instance of the Appreciation Phase since March 7, 2017. In 2024, bitcoin had 68 days of the Appreciation Phase, marked in light green on the table “Bitcoin’s Price Phases 2024." This phase, where one-year realized volatility is below the fifth percentile and 95% or more of addresses are in profit, is a highly unique occurrence. The emergence of high profit amidst low volatility is a bullish sign, suggesting persistent demand for bitcoin despite the absence of significant price fluctuations.  

The thesis that bitcoin entered the Appreciation Phase in February was further strengthened by a new all-time closing high of nearly $69,000 on March 4, 2024. With new all-time highs in price making global headlines, it became increasingly likely that low volatility would soon give way to high volatility and the Acceleration Phase. 

On July 15, 2024, one-year realized volatility surpassed the fifth percentile, marking the beginning of the Acceleration Phase—a period of heightened volatility and profitability. In previous cycles, this phase has seen bitcoin reach new all-time highs, culminating in a blow-off top and cycle peak. This phase is not characterized by a straight upward trajectory, however. Instead, it can be marked with sharp volatility in both directions. This current cycle is shaping up similarly to both the 2013 and 2017 Acceleration Phases, which can be viewed in more detail in the appendix, “Bitcoin Price Phase Heat Maps (2010–2025)”.

As of February 2025, bitcoin is now over the midway point of the Acceleration Phase from a historical perspective. The chart below is measured in days since the beginning of the Acceleration Phase on the x-axis and percentage increase in bitcoin price on the y-axis:  

The 2024–2025 Acceleration Phase is behaving similarly to past cycles, with the blow-off top historically happening later in the phase and providing diminishing returns each cycle. This would put a potential top for this cycle in the second quarter of 2025. However, global events can always alter bitcoin’s course at any moment, as was the case with the COVID-19 pandemic. A market shifting event could end the Acceleration Phase prematurely or extend it further than anticipated, although this cycle has been uninterrupted so far.

Conclusion

Volatility can provide a unique view into bitcoin’s current environment and help investors make informed decisions about what may lie ahead. Looking through the lens of profit and volatility, an investor can see signs of upcoming changes earlier than they may be able to when only looking at price. 

From a price phase standpoint, the bullish move of 2024 ultimately began to develop in June 2023 as the first glimpse of the Bottoming Phase appeared, signaling that the high volatility that had persisted since March 2017 was finally subsiding. This change in volatility signaled that bitcoin was potentially entering a new bullish phase, and each subsequent day of low volatility strengthened that thesis. 

As shown in the appendix, bitcoin’s price on June 13, 2023, was an unassuming $25,897. However—like an underlying current on seemingly calm waters—a shift in volatility was occurring. In this way, volatility plays a crucial role in understanding the current environment and trends of bitcoin.

Interested in learning more about bitcoin’s current cycle? Get in touch with a member of our team.

Appendix: Bitcoin Price Phase Heat Maps (2010–2025)