Key points
The cryptocurrency winter follows this sequence: major events → collapse of trust → brain drain
The past winter was caused by internal problems; the current rise and fall is driven by external factors; it is neither a cold winter nor a warm spring.
The post-regulatory market is divided into three tiers: regulated areas, unregulated areas, and shared infrastructure; the trickle-down effect disappears.
ETF funds remain in Bitcoin and do not flow out of the regulated area.
The next bull market requires killer applications and a favorable macroeconomic environment.
1. How did previous cryptocurrency winters occur?
Source: Tiger Research
The first "winter" occurred in 2014. At that time, the Mt. Gox exchange handled 70% of global Bitcoin trading volume. A hack resulted in the loss of approximately 850,000 Bitcoins, causing a collapse in market trust. Subsequently, new exchanges with internal controls and auditing mechanisms emerged, and trust began to recover. Ethereum also entered the market through ICOs, opening up new possibilities for visions and fundraising methods.
This ICO became the catalyst for the next bull market. The boom of 2017 ensued when anyone could issue tokens and raise funds. Numerous projects raised billions of dollars with just a white paper, but most lacked substance.
In 2018, South Korea, China, and the United States all introduced regulatory policies and measures, leading to the bursting of the bubble and the arrival of a second wave of economic downturn. This downturn did not end until 2020. After the COVID-19 pandemic, liquidity poured in, and decentralized finance (DeFi) protocols such as Uniswap, Compound, and Aave gained attention, with funds returning to the market.
The third winter was the most severe. Following the Terra-Luna crash in 2022, Celsius, Three Arrows Capital, and FTX all collapsed. This wasn't simply a drop in cryptocurrency prices; the entire industry structure was impacted. In January 2024, the U.S. Securities and Exchange Commission (SEC) approved a Bitcoin exchange-traded fund (ETF), and subsequent Bitcoin halvings and Trump's pro-cryptocurrency policies led to a renewed influx of funds into the cryptocurrency market.
2. The Cryptocurrency Winter Pattern: Major Events → Collapse of Trust → Talent Loss
These three economic downturns all followed the same pattern: first, a major event occurred, then trust collapsed, and finally, talent was lost.
It all begins with a major event . Examples include the Mt. Gox exchange hack, ICO regulatory reforms, the Terra-Luna collapse, and the subsequent FTX bankruptcy. Each event differed in scale and form, but the result was always the same: the entire market was gripped by panic.
The shock quickly spread, causing a collapse of trust . People who had been discussing the next steps began to question whether cryptocurrency was truly a meaningful technology. The collaborative atmosphere among developers vanished, and they began blaming each other and arguing about who should be held responsible.
Doubt led to a brain drain . Those who had once created new momentum in the blockchain space began to waver. In 2014, they moved to fintech and large tech companies. In 2018, they shifted their focus to financial institutions and artificial intelligence. They left in search of seemingly safer places.
3. Is it currently a cryptocurrency winter?
The patterns of past cryptocurrency winters are still evident today.
Major events :
Trump's Memecoin launch: Market value soared to $27 billion in one day, then plummeted by 90%.
10.11 Liquidation Event: The United States announced a 100% tariff on Chinese goods, triggering the largest liquidation in Binance's history ($19 billion).
Trust collapses : Suspicion spreads throughout the industry. Focus shifts from the next product development to mutual blame.
Talent drain pressure : The rapid development of the artificial intelligence industry is expected to bring faster exit speeds and greater wealth than cryptocurrencies.
However, it's difficult to call this a cryptocurrency winter. Past winters have often stemmed from within the industry itself. The Mt. Gox exchange was hacked, most ICO projects were exposed as scams, and FTX collapsed. The industry itself lost trust.
The situation is different now.
The approval of ETFs triggered a bull market, while tariff policies and interest rates led to a decline. External factors both boosted and dragged down the market.
Source: Tiger Research
The builders haven't left yet.
Real-world assets (RWA), perpetual decentralized exchanges (Perp DEX), prediction markets, InfoFi, privacy protection. New narratives are constantly emerging and being created. While they haven't shaken the market as much as DeFi, they haven't disappeared either. The industry hasn't collapsed; what has changed is the external environment.
We have not created spring, so there is no such thing as winter.
4. Changes in market structure after regulation
Behind this lies a significant shift in market structure brought about by regulation. The market has now differentiated into three tiers: 1) regulated areas, 2) unregulated areas, and 3) shared infrastructure.
Source: Tiger Research
The regulated sectors include RWA tokenization, exchanges, institutional custody, prediction markets, and compliant DeFi. These sectors require auditing, disclosure, and legal protection. Growth is slow, but the capital base is large and stable.
However, once in regulated territory, it becomes much harder to achieve the explosive returns of the past. Volatility decreases, limiting upside potential, but downside potential is also limited.
On the other hand, unregulated areas will become more speculative in the future. Low barriers to entry and rapid price fluctuations will make it more common for prices to rise 100 times in a day and fall 90% the next.
However, this area is not without its challenges. Industries born in unregulated spheres are brimming with creativity, and once they gain acceptance, they move into regulated spheres. DeFi is a prime example, and prediction markets are now following suit. It's like a testing ground. But the lines between unregulated spheres and industries within regulated spheres will become increasingly blurred.
Shared infrastructure includes stablecoins and oracles. They are used in both regulated and unregulated markets. Institutional RWA payments and Pump.fun transactions both use the same USDC. Oracles provide data for tokenized bond verification and anonymous DEX clearing.
In other words, as markets differentiate, capital flows also change.
In the past, when Bitcoin rose, other cryptocurrencies would also rise through a trickle-down effect. But the situation is different now. Institutional capital entering the market through ETFs has remained in Bitcoin, stopping there. Funds from regulated areas do not flow into unregulated areas. Liquidity stays only where value is validated. Even so, Bitcoin's value as a safe-haven asset relative to risky assets has yet to be proven.
5. Conditions for the next bull market
Regulatory issues are being gradually resolved. Developers are still building. So, two things remain.
First, a new killer use case must emerge in the unregulated space . It must create unprecedented value, like the "DeFi Summer" of 2020. AI agents, InfoFi, and on-chain social networking are all candidates, but their scale is not yet sufficient to drive the entire market. We need to re-establish the process of validating unregulated experiments and bringing them into the regulated sphere. DeFi has done this, and prediction markets are doing it now.
Secondly, the macroeconomic environment is crucial . Even if regulatory issues are resolved, developers begin building, and infrastructure continues to improve, its development space will still be limited if the macroeconomic environment is unfavorable. The "DeFi Summer" of 2020 saw explosive growth in the DeFi market due to the release of liquidity after the COVID-19 pandemic. The surge following the approval of ETFs in 2024 also coincided with market expectations of interest rate cuts. No matter how well the cryptocurrency industry performs, it cannot control interest rates and liquidity. For the industry to gain acceptance, the macroeconomic environment must improve.
The kind of "crypto bull market" where all cryptocurrencies rose in tandem is unlikely to return. This is because the market has become more differentiated. Regulated sectors are growing steadily, while unregulated sectors are experiencing significant price fluctuations.
The next bull market will eventually arrive, but not everyone will be able to enjoy it.
