Understanding the key to crypto cycles is essentially about grasping the evolution of investor sentiment.

Looking at Bitcoin's historical trends, each cycle involves four distinct phases of changing mindset among participants.

First is the **Optimism Phase**—large funds and institutional investors clearly increase their positions, and continuous buying pushes prices higher. Market sentiment gradually shifts from caution to optimism, with more and more people believing the upward trend will continue.

Next is the **Profit-Taking Phase**—as prices are rapidly driven up, early investors start realizing significant gains. The pressure to lock in profits becomes evident, and frequent sell-offs of early holdings may slow down the price increase.

Then comes the **Hesitation Phase**—market sentiment begins to waver. Should investors hold on for higher prices or take profits now? This internal conflict is reflected in various data points: fluctuating trading volume, increased volatility, and participants adopting a wait-and-see attitude.

Understanding the rotation of these four phases captures the true driving forces behind the cycle.