a regulator Campaigna bench collapseand persistent inflation It would apparently spell trouble for the health of the crypto industry, but Bitcoin, Ether, and other marquee tokens have skyrocketed since early 2023.
Bitcoin, the largest cryptocurrency by market capitalization, is up 72%, recently crossing the $30,000 threshold. (It has since fallen below $28,500, as inflation and rising interest rates have scared investors). Ether, the second largest, is up 62%, surpassing $2,000 after a successful upgrade to ethereum, the token's blockchain. And the total market capitalization for all cryptocurrencies is about $1.2 trillion, an increase of about 50% since the beginning of the year, according to CoinMarketCap.
While recent prices for the most prominent digital assets still pale in comparison to their heights in 2021, when total crypto market capitalization approached $3 trillion, the price rally has observers wondering if Crypto Spring has finally come around. emerged.
Is the crypto winter over or should I still hang my warm clothes on the door? ๐
โ Sariraa.eth (@SariraMerikhi) April 14, 2023
But is Crypto Winter really over? Fortune spoke to four analysts to place the current rally in historical context.
The four-year cycle hypothesis
"Crypto has worked like clockwork in four-year cycles," said Matt Hougan, chief investment officer at Bitwise Asset Management, a crypto investment team. Fortune.
And so far, he says, there have been three rounds of peaks and valleys.
From 2011 to 2013, the price of the cryptocurrency rose and then fell in 2014 with the collapse of one of the first Bitcoin exchanges, Mt. Gox, which went bankrupt after hackers made off with hundreds of millions in customer funds.
From 2015 to 2017, cryptocurrency prices rose again and plummeted in 2018 as the era of ICOs, or initial coin offerings, left many investors private as many of the tokens they feverishly bought turned out to be quick cash grabs.
And from 2019 to 2021, prices rose once more, falling in 2022 after a number of high-profile crypto companies failed, most notably FTX, the bankrupt exchange once valued at $32 billion.
Some analysts have commonly understood that Bitcoin's price fluctuations, and the growth of the crypto industry in general, roughly correspond to when Bitcoin is "half reducedโ, or when the rewards for mining Bitcoin, the process by which computers protect the blockchain of the digital asset, are reduced by 50%.
This reduction in Bitcoin rewards, according to the theory, makes the supply of cryptocurrency more scarce, which increases its price.
โAfter the halving, there is a big rally,โ said Gautam Chhugani, managing director and senior analyst for digital assets at AB Bernstein. Fortune. "Before the halving, there's an anticipation rally that happens."
Bitwise's Hougan, on the other hand, believes that the start of each four-year cycle corresponds to technical innovations. In 2011, mass market crypto exchanges:coin base, Kraken, etc., launched, allowing laymen to buy Bitcoin with cash. In 2015, Vitalik Buterin invented Ethereum, which promised to decentralize cloud computing. And in 2019, the โfirst real applications of Ethereumโ 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 instances of price rises and falls, a small data set. However, if the trend holds, cryptocurrencies will have another bull run.
Bullish on Bitcoin and Crypto
In the near term, AllianceBernstein's Chhugani believes that Bitcoin and the crypto industry will follow the peaks and troughs of the larger world economy. However, he is optimistic about his prospects in the medium and long term. "Bitcoin has never had a negative two years as a result," he said. Fortune.
Analysts at Bitfinex Alpha, a market research team within the Bitfinex crypto exchange, agree. "While it is not yet known if Crypto Winter is finally over, Bitcoin network activity indicates a healthy uptrend in transaction fees," they said in a statement to Fortune.
And Brian Rudick, a senior strategist at cryptocurrency trading firm GSR, thinks it's arguable that the industry is even in a bear market. "It depends on what your definition of Crypto Winter is," he said.
Based on price and sentiment, or how the public views cryptocurrencies, the cold of winter is obvious. However, by other metrics, it's comparatively nice.
Rudick cited a 40% increase in cryptocurrency users in 2022, according to Crypto.coma 5% increase in the number of developers in 2022, according to Electric Capitaland a 293% increase in smart contracts deployed on Ethereum, or programs that run on the blockchain, according to alchemy.
Despite the optimism, Chhugani, an analyst at AB Bernstein, warned that the feverish pace that saw the price of Bitcoin rise to nearly $70,000 in 2021 is not just around the corner. "Regulation remains a challenge," he said. Fortune. "So we're not in the middle of some crazy, raging bull market."
That being said, he remains optimistic. โThis industry has died like a hundred times in the last 14 years,โ he said. Yet despite constant predictions of cryptocurrency crashes, he added, "it doesn't really happen."
