Will we experience another “crypto winter” like 2018?

The young cryptocurrency market is facing the most pivotal period in its history.

Bitcoin has fallen 55% since reaching an all-time high of $69,000 in November 2021. Just a few weeks ago, Terra, the second-largest DeFi ecosystem, collapsed in the largest catastrophic event in the history of the cryptocurrency market. Retail, institutional and even corporate investors lost more than $60 billion in LUNA and UST in a matter of days as the 7th and 10th cryptocurrencies by market cap collapsed.

To complicate matters further, the correlation between cryptocurrencies and U.S. stocks is at an all-time high in 2022. Combined with the war in Ukraine, the highest inflation rate in 40 years, and U.S. monetary policy are all headwinds for the cryptocurrency market’s downward trend over the past 6 months.


Confronting another crypto winter can be unsettling. However, since 2018, the industry has undergone an accelerated evolution, with the last cold winter lasting about 18 months, leaving hundreds of projects born in the ICO era frozen in our memory.

This article compares the cryptocurrency winter of 2018 to the current 6-month bear market trend in an attempt to assess whether a “crypto winter” is really coming, and where the cryptocurrency industry can look forward to in the coming months.

The ICO Era and the First Crypto Winter

In 2017, fueled by the ICO boom, the cryptocurrency space experienced its first apparent expansion period, peaking in December of that year with a major bull market, with many existing startups and new projects utilizing cryptocurrencies as a new funding mechanism.

From a macro perspective, there was optimism about a sustained economic recovery at the time. Epic Games’ game Fortress Heroes generates $8.5 billion in annual revenue, while Apple is the most valuable brand, and tech stocks are booming.

The excitement surrounding cryptocurrency startups has attracted a lot of capital into the space , mostly from retail investors. Many businesses have changed their names to include “blockchain” or “cryptocurrency”, and some have even decided to reorient their entire operations to capture the trend — reminiscent of the DOTCOM bubble.


However, blockchain adoption at the time was low and even less regulated than it is today. By the end of 2017, only 104 Dapps were up and running , when the total market capitalization of cryptocurrencies exceeded $800 billion for the first time. Cryptocurrencies such as BCH, MIOTA, DASH, and XMR are in the top 10 by market cap along with BTC, ETH, LTC, and XRP.

A lack of regulation and too much money pouring into junk projects quickly made the nascent industry unsustainable. It is estimated that in the ICO era, 90% of projects fail less than 6 months after launch. However, projects that have become mainstream in today’s industry, such as Decentraland and Enjin, were also born during the ICO era.

Multiple scams and failed projects have created a sense of uncertainty for the entire industry. After Bitcoin’s price hit a record high, reaching nearly $20,000 in December 2017, a series of events put enormous pressure on the cryptocurrency industry, causing the biggest bull run ever to turn into a grueling crypto winter .

While Bitcoin hit a record high, CME, the world’s largest derivatives exchange, also launched its first Bitcoin-based futures. Institutional investors are massively shorting bitcoin , exerting unprecedented selling pressure on the crypto asset.

Additionally, rumors of a possible ban on cryptocurrency trading in South Korea and other Asian countries, as well as a hack that cost Coincheck $530 million and halted trading on the Japanese OTC exchange over the next few months, have all contributed to the bear market. advent.


Finally, the price of Bitcoin collapsed to $7,700, down 65% from its December 2017 high. Overleveraged retail investors lost large sums of money, coupled with market instability and looming regulation , which led to a brutal and long winter that froze most ICO projects that were still in their infancy.

The crypto winter of 2018 lasted nearly 18 months. Aside from these prosaic figures, this period was marked by little to no interest in participating . Investor interest returned in July 2019 when the price of Bitcoin surged past the $10,000 mark, and the market entered a recovery period, but the market crashed again in March 2020 shortly thereafter.

The crypto winter of 2018 was caused by a combination of factors inherent to the industry. The uncertainty caused by the high failure rate of ICO projects, the image of over-leveraged individual investors, and the skepticism of upcoming regulations create the perfect setting for the crypto winter.

Now, four years later, will history repeat itself?

No hibernation, it’s time to build

Before comparing the current market situation with 2018, it is necessary to understand how the blockchain industry got to its current state.

The last crypto winter was a critical period for the rapid development of the blockchain ecosystem, and the foundation of the industry as we know it today was laid.

Despite the downward trend in the market at the time, leading projects also continued to work on building and optimizing their products. Lightning Networks like ETH and BTC achieved important milestones, and projects like Axie Infinity and ETHLend  (now called Aave) were all launched during that period of scarcity of interest.

After 18 months of continued struggle, the cryptocurrency industry is starting to show signs of recovery. There has been renewed interest in the space and prices have started to soar. However, it has also pressed the pause button on the recovery of the cryptocurrency market as the Covid-19 pandemic has affected almost all industries.

In March 2020, with the outbreak of the new crown epidemic, various countries resorted to blockade measures, interrupting the global supply chain, causing great shocks in the global financial market. The price of Bitcoin flashed nearly 50% in one day, and the S&P 500 fell 23% in two weeks.

Despite the complexities, several verticals have taken advantage of this market , with tech stocks like Amazon, Netflix, Zoom and Peloton surging in price. Likewise, the Dapp landscape is starting to take shape as major projects announce their improved products.

The summer of DeFi in 2020 saw a plethora of projects demonstrating the potential of decentralized finance. Curve, MakerDAO, Uniswap, PancakeSwap, and a handful of other DeFi projects paved the way for a multi-billion market, with projects named after food and animals, and the narrative of the Dapp industry has completely changed.

At the same time, the United States has been printing a lot of money, and the amount of money printing in just two years is the same as in the past few decades. It has injected water into the market, hoping to stimulate consumption to drive the economy, so that retail and institutional investors have turned their attention to the cryptocurrency market.

On October 10, 2020, the price of bitcoin surged 120% from its March lows, surpassing $12,000 for the first time since early 2018. At this time, people’s interest in the blockchain industry has returned. Adoption, consumer confidence, and invested capital are all on the rise, fueling the start of the next bull market. In just 6 months, the price of Bitcoin has risen by 134%.

Three major sectors to fuel the 2021 bull market

By 2021, the crypto winter is a distant memory. The bull market train rolled on, Bitcoin soared to $60,000, and the cryptocurrency market value topped $2 trillion for the first time in April of that year. Bitcoin and Ethereum are still the top two cryptocurrencies, and BNB, USDT, DOT, ADA, UNI and LINK have squeezed into the top ten cryptocurrencies, showing a new face of the cryptocurrency industry.


At this point, the Dapp field begins to harvest the seeds sown in the winter two years ago. The industry’s three main categories — DeFi, NFTs, and GameFi — have shown exponential growth for much of 2021, attracting millions of new users and billions of dollars in investment. Web3 paradigms such as multi-chain interoperability and Play-to-earn are on full display.

For example, in November of last year, DeFi protocols locked more than $200 billion in assets in smart contracts. The multi-chain model has helped the likes of Polygon and Avalanche become dominant projects in the DeFi ecosystem, with billions of dollars worth of assets locked up.


Then came the NFT craze , generating more than $22 billion in transaction volume last year. Meanwhile, the top 100 most valuable NFTs on Ethereum have a market cap of $16.7 billion. Artists like Beeple, Pak, and Fewocious brought NFTs to the mainstream stage, and collectibles like CryptoPunks and BAYC became a cultural phenomenon , attracting celebrities and brands to the space. The potential of this blockchain use case is revealed as NFTs enable ownership and authentication.

Similar to NFTs, blockchain-based games will grow exponentially during 2021. Games like Axie Infinity, Upland, and Alien Worlds employ cryptocurrencies and NFTs to compensate their players, creating new revenue streams. The popularity of such games, especially in emerging economies, gave birth to the concept of Play-to-earn.


With Facebook’s rebranding, a new hype cycle has been created, a narrative around the “metaverse.”

Cryptocurrencies and NFTs associated with the Metaverse have experienced significant demand growth, leading to fairly high valuations. In Q4 2021, Metaverse-related Dapps generated over $330 million in NFT transaction volume and over 50,000 unique traders, with VCs and other investors pouring into blockchain-based metaverse and gaming projects record funding.

Last November, the blockchain industry hit a new peak, with Bitcoin reaching $69,000, a 360% increase in a year, and Ethereum and most cryptocurrencies peaking in the same month. After Meta’s announcement, the market cap of cryptocurrencies surpassed $2.8 trillion, and the industry was full of optimism.

Complex Macro Situation

The time comes to 2022, and the current state of the industry is much better than it was four years ago.

Hundreds of applications spanning multiple blockchain ecosystems attract 2.5 million active wallets; investor profiles are also quite different, with institutional and corporate investors now dominating the crypto space ; the popularity of crypto derivatives, Cumulative Crypto Assets Under Management (AUM) is approaching $60 billion; meanwhile, VCs and private investors have poured over $30 billion into blockchain projects, a third of which are in games and metaverse projects to help them Building the foundation for the Web3 metaverse.

From a macro perspective, things are different now than they were in 2018. The negative impact of the Ukrainian-Russian war has brought severe challenges to global markets, and not long ago, the Federal Reserve (FED) raised interest rates by 0.5% for the first time in two years, confirming the suspicion at the beginning of the year that the Fed was about to raise interest rates in response to rising inflation.

In addition, the wave of money printing is starting to have an impact. With the S&P 500 off to its worst start since World War II and U.S. inflation at levels not seen in nearly 50 years, these macroeconomic factors are sending markets into what appears to be a recession.


The macroeconomic situation has thwarted the bull trend fueled by the Metaverse, and despite the industry’s profound evolution over the past four years, Bitcoin has fallen 55% since its all-time high in November, and the Terra event gave the first macroeconomic experience The recessionary cryptocurrency market has brought more pressure.

Is Crypto Winter Coming?

However, compared to the crypto winter of 2018, the market conditions we are seeing now are markedly different.

First, the blockchain industry has gone from a small group of isolated networks to a series of interconnected ecosystems that attract millions of everyday users. Three main categories – DeFi, NFTs, and GameFi flourished into multi-billion dollar segments.

Likewise, the profile of investors has changed from a large number of retail investors to larger institutions and corporations with more economic power . Awareness of this space is higher than ever, with cryptocurrency company sponsorships seen in almost every major sport, billboards for Web3 products in multiple cities around the world, and Bitcoin may It has become a store of value for countries such as Venezuela and Argentina that are facing hyperinflation.

The same is true for NFTs. This type of digital asset is decoupling from the stock and cryptocurrency markets , proving to be one of the most resilient assets in recent history, and like a work of art, has historically been one of the most resilient investment vehicles.

Web3 brands built on the cutting edge of the Metaverse, showing organic growth in the field . Web3 brands like Yuga Labs, The Sandbox, and RTFKT have partnered with numerous retail giants, including Adidas, Nike, HSBC, Warner Bros., and more. Many professionals are flowing into the blockchain world from leading Web2 projects.

Although the blockchain industry has become important, challenges remain. The collapse of Terra sent the sector bottoming out, and with the exception of DAI and a few other stablecoins, many stablecoins, including USDT, struggled to maintain prices during periods of high volatility. Trust in the entire algorithmic stablecoin sector may prevent smart investors from entering weak DeFi , so security and regulations are topics that need to be brought to attention as soon as possible.

In addition to these inherent challenges of blockchains, the record-high correlation between the stock and cryptocurrency markets presents another burden. As mentioned, capital markets have had their worst start since the 1940s, and high-flying tech stocks like Netflix, Facebook, Roku, Wix, and Robinhood have fallen sharply. With the possibility of a recession becoming more and more likely, the capital market does not look optimistic in the short term.


(Correlation between BTC and S&P 500)

So, comparing 2018 to now, despite the impressive maturity of the cryptocurrency industry and the accelerating expansion of the Web3 community, the crypto winter may well have arrived.

The macroeconomic situation, coupled with the collapse of Terra, has made things worse for the cryptocurrency market, which has entered a correction phase. However, due to the level of popularity, interest in the industry shouldn’t drop as sharply as it did in 2018.

As a digital asset with unique economic attributes, there is still demand for Bitcoin and other cryptocurrencies. Meanwhile, adoption by businesses and governments will force lawmakers to work on policies to regulate regulated digital assets.

However, we need to take into account that the cryptocurrency market is cyclical. A cycle of consolidation and capitulation is healthy for any industry, and it creates financial stability. To quote Musk:  A recession isn’t necessarily a bad thing. I’ve been through it a few times. What tends to happen is that if you have a boom that lasts too long, you misallocate capital and start throwing money at fools. “

The same applies to the crypto winter, a period that should be seen as an opportunity to cleanse the market. In tough times, successful projects will continue to be built, while empty projects will fall through the cracks.


To newcomers, the crypto winter feels like a bubble burst, but that’s not the case. The blockchain industry recovers every time it experiences a cold winter. While it is about to experience its first Great Environmental Recession, the maturity demonstrated by multiple segments puts the cryptocurrency space in a good position to withstand a prolonged bear market .

Now, the main question is, how long until spring?