As a Bristolian who specialises in early England, this question speaks to me. But it's really two questions.

"Bristol" doesn't really get started until the 10th Century. Many of the areas of the modern city existed as settlements, yes, but the Anglo-Saxon port town at the Brygc-stoc doesn't appear until the 900s, when it suddenly makes its presence conspicuously felt in the records of the surrounding areas. You're right in saying that Bristol's location made it well suited for growth and success; the city was a boom town and was a major economic centre throughout the medieval period. Indeed, until the Civil War, Bristol's castle was purportedly one of the largest and most impressive in the country, as well as an important mint site as late as the reign of Henry VIII. In the 920s, however, as "England" coalesced as a nascent unified polity under Æthelstan, Bristol was still very much a new, if booming, settlement, centred on largely new economic opportunity and with both contemporary and well-established rivals. Bristol is also fairly remote from the West Saxon heartlands, which were originally in South Oxfordshire and Hampshire, and by the 7th century were also shifting to East Dorset, with the Cerdicing family institution at Wimborne Minster. Bristol lies directly on the borderline between West Saxon Somerset and Mercian Gloucestershire.

Bristol's development in the 10th century comes as a result of new emerging economic opportunities for lucrative trade with Hiberno-Norse settlements on the East coast of Ireland. Slaves were a major trade commodity, as well as cattle, metalwork, raw materials, silver and textiles. Bristol's contemporary rival in this was Chester, which also rose rapidly to prominence following its reconstruction in 907 by Æthelred and Æthelflæd of Mercia. Chester was a major prestige project for the resurgent Mercian state, however, with the complete restoration of the city's Roman walls, new churches and religious institutions, and the repopulation of the surrounding plains under the auspices of the Mercian garrisons at Chester, Eddisbury and Runcorn. In fact, the association of St Werburgh with Bristol is likely the result of the growth of an enclave of Chester merchants in the city who venerated that Mercian saint after her relics were translated from Hanbury on the Danelaw border to Chester in 907/8. As a result of a plague devastating South-East England in the late 890s, the burh at Chester also rapidly became the most productive mint in England.

There were also a large number of very well established rivals besides Chester. Gloucester had been extensively remodeled, refortified and improved as a capital by Æthelflæd, who also maintained the old Mercian capital at Tamworth, which was dedicated as a burh in the 910s. In the South, Exeter was another prominent trade port with Roman defences and an important Cathedral, while Winchester functioned as a de facto West Saxon capital in the Wessex heartlands, as well as being the resting place of many prominent Cerdicings and Saint Swithun. Kent and the South East a long established history as the economic hub of England, right up until the 890s. Canterbury, of course, is the centre of the Church, but along with Rochester had been centres of coinage production and economic importance for centuries. Canterbury also had prestige as the capital of Kent, which had been the first kingdom to convert and had held Bretwalda status in the 6th Century. London then takes on much of this trade and prestige. The city is a major port and mint site, crucially close to the Channel coast of Europe and the network of wic trade sites which had proliferated in the sixth century. While Bristol is wealthy and important, it's still nascent at this time.

Bristol's decline is down to a number of factors. Although there were a number of coal fields around Bristol, these weren't on the scale of those found in the North and in Wales, and so the city never developed the heavy industry to quite the same extent as major Northern cities. It was, however, still one of the country's most important industrial ports right up until the Second World War, as well as an important hub of aircraft production. The Blitz targeted Bristol's harbour heavily, and the city centre was devastated in December 1940. By the time of post-war reconstruction, cargo ships of economically viable tonnage found it increasingly difficult to navigate the river as far as Bristol Harbour, so the existing docks at Avonmouth were significantly extended by the construction of the Royal Portbury Dock in the 1960s, and shipping moved there, Bristol Harbour finally closing to commercial traffic in 1968. As their riverside locations were no longer logistically efficient, much of the heavy industry in the city docklands also moved out of the city in this period.