a regulator actionA banking collapse, and persistent inflation would seem to spell trouble for the health of the crypto industry, but bitcoin, ether, and other marquee tokens have skyrocketed since the start of 2023.
Bitcoin, the largest cryptocurrency by market capitalization, is up 72%, recently crossing the $30,000 threshold. (It has since fallen below $28,500 due to inflation and rising interest rates.) scared Investors.) Ether, the second largest, is up 62%, with Ethereum blowing past $2,000 after a successful upgrade to the token’s blockchain. And the total market cap for all cryptocurrencies is up to nearly $1.2 trillion, an increase of nearly 50% since the beginning of the year, according to coinmarket cap,
While the most prominent digital asset’s recent prices still pale in comparison to their heights in 2021, when the total crypto market cap was nearing $3 trillion, the price rally has observers questioning whether the crypto spring has finally sprung.
Is crypto winter over or should I still be hanging my warm clothes by the door?
— Sarira.eth (@SariraMeriki) April 14, 2023
But is crypto winter really over? Luck WebMD spoke to four analysts to put the current rally in historical context.
4 year cycle hypothesis
“Crypto has worked like clockwork in a four-year cycle,” said Matt Hougan, chief investment officer at crypto investment outfit, Bitwise Asset Management. Luck,
And so far, he says, there have been three periods of peaks and valleys.
From 2011 to 2013, the cryptocurrency’s price rose and then fell in 2014, coinciding with the collapse of one of the early bitcoin exchanges, Mt Gox, which went bankrupt after hackers siphoned off hundreds of millions in customer funds. Was.
From 2015 to 2017, crypto prices rose again, declining in 2018 when the era of ICOs, or initial coin offerings, left many investors as many of the tokens they bought turned out to be fast cash grabs.
And from 2019 to 2021, prices rose once again, declining in 2022 after a series of high-profile crypto companies, most notably FTX, were valued at once bankrupt exchange $32 billion,
Some analysts generally interpret bitcoin price volatility — and the growth of the crypto industry at large — as roughly coinciding with when bitcoins are “halved,” or when the rewards for mining bitcoins, the process by which computer digital Assets secured blockchain, become less. 50%.
This reduction in bitcoin rewards, the theory goes, reduces the cryptocurrency’s supply, driving up its price.
“After the halving, there is a huge rally,” said Gautam Chugani, managing director and senior digital asset analyst at AB Bernstein. Luck, “Before the halving, there is an anticipation rally.”
Bitwise’s Haugan, on the other hand, believes that the start of each four-year cycle coincides with technological innovation. In 2011, mass-market crypto exchanges—Coinbase, Kraken, etc.—were launched, allowing ordinary people to buy bitcoin with cash. In 2015, Vitalik Buterin invented Ethereum, which promised to decentralize cloud computing. And in 2019, “the first real applications of ethereum” appeared, Hougan says, including DeFi, or decentralized finance, stablecoins, and NFTs, or non-fungible tokens.
The four-year cycle hypothesis uses a sample size of three examples of price gains and declines, a smaller dataset. However, if the trend persists, crypto is due for another bull run.
Bullish on bitcoin—and crypto
In the short term, Chugani of AllianceBernstein believes that bitcoin and the crypto industry will follow the peaks and valleys of the larger world economy. However, he is optimistic on its medium and long term outlook. “Bitcoin has never resulted in two negative years,” he said. Luck,
Analysts at Bitfinex Alpha, a market research team within crypto exchange Bitfinex, agree. “While the jury is still out on whether crypto winter is finally over, bitcoin network activity is indicating a healthy increase in transaction fees,” he said in a statement. Luck,
And Brian Ruddick, senior strategist at crypto trading firm GSR, believes it’s logical that the industry is in a bear market as well. “It depends on what your definition of crypto winter is,” he said.
Based on price and sentiment, or how the public views crypto, the winter chill is evident. However, going by other metrics, it’s comparatively good.
Rudik cited a 40% increase in crypto users in 2022, according to crypto.com5% increase in the number of developers in 2022, According to Electric Capitaland a 293% increase in smart contracts deployed on Ethereum, or programs running on the blockchain, according to alchemy,
Despite the optimism, analyst Chugani at AB Bernstein cautions that the feverish momentum that will propel bitcoin’s price to nearly $70,000 in 2021 is not directly around the corner. “Regulation remains challenging,” he pointed out. Luck, “So we’re not in the middle of a crazy raging bull market.”
That said, it remains bullish. “This industry has died about 100 times in the last 14 years,” he said. However, despite frequent predictions of crypto’s collapse, he added, “It doesn’t really happen.”