Crypto market cycles have always been a rollercoaster, but the ride has changed over the years.
In the early days, Bitcoin surges were brief yet explosive, driven by raw speculation and tiny market caps. These days cycles operate on a far bigger scale, a result of institutional involvement and clearer regulations. Although the days of 500x gains for BTC itself are over, low-cap altcoins still regularly go stratospheric.
The fact that digital assets are increasingly integrated into the global financial landscape speaks to the dramatic differences between modern market cycles and those of the 2010s. Which is not to say patterns aren’t broadly similar: the average cycle length remains about four years, and phases of accumulation, markup, distribution, and markdown still repeat like clockwork, shaped by psychology, supply shocks, and macro forces. Understanding them reveals why this cycle feels…well… different.
The Four Phases
Accumulation occurs after a bear market hits its nadir, when the sense that recovery is possible takes hold. It’s analogous to the first tentative efforts at tidying the wreckage of a debaucherous house party. After savvy buyers scoop assets at lows, the markup period follows as prices climb, retail interest piques, and media hype builds. We’re so back, baby.
Alas, what goes up must come down. Distribution sees smart money exit at peaks, while latecomers continue to chase highs. Markdown crashes the party, wiping gains until the next bottom. Rinse and repeat.
As mentioned, early cycles were brutal and brief: many investors got wrecked, some got very rich, and others kept their eyes on the prize and DCA’d. Before altcoins numbered in the thousands Bitcoin was the star of the show (it still is) and its first two cycles saw gains of over 500x from the previous cyclical low. Back then, Bitcoin wasn’t a household name, liquidity was low, and volatility ruled. A digital asset could moon without too many people noticing or caring.
From Speculation to Structure
The first major Bitcoin cycle – at least the first that penetrated mainstream consciousness – peaked with ICO mania in 2017. BTC gains were an order of magnitude lower than before, but smart investors were still making crazy profits and retail FOMO centered on Initial Coin Offerings sucked retail into the vortex. Media coverage did a 10x, and though infrastructure still lagged, the foundations of the modern crypto industry were quietly being assembled.
Although the drawdown that followed the ICO boom was worse than the dot-com bubble’s collapse, with Bitcoin sinking from $20k to less than $3,200 in 2018, blockchain and crypto were suddenly talking points: everyone had a view, whether positive or negative: cool heads recognized that the sceptics’ pronouncement of the industry’s death had been greatly exaggerated. The phoenix would rise from the ashes.
And so it proved. Not even a pandemic could stop Bitcoin from building momentum. Partly this was a consequence of unprecedented fiscal stimulus, and partly it was due to the 2020, whereafter Bitcoin gained 34% in five months before breaking its previous ATH at seven months. Alts were coming along for the ride, too: on average, the top 10 alts rose 1,700% over the course of the year.
Fast-forward five years and we’re on the other side of both the pandemic and another halving. Since the launch of Spot Bitcoin and Ether ETPs (exchange-traded products) last year, over a trillion dollars has been pulled from traditional portfolios. Crypto ETPs, like the underlying tokens themselves, have matured from speculative assets to portfolio staples.
Even banks themselves are experimenting with tokenized deposits and bonds; BNY Mellon, for example, recently teamed up with tokenization platform OpenEden to provide asset management and custody services for the US Treasuries backing its flagship tokenized product TBILL. As a result, the latter has become the first ever tokenized Treasury fund run by an “A”-rated global custodian.
“Every cycle has a defining feature,” says Andrei Grachev, Founding Partner at Falcon Finance. “In the early years it was speculation, whether it was from ICOs to meme assets. This cycle is different. It is being defined by infrastructure. Stablecoins now settle trillions of dollars in annual transactions. Tokenized treasuries and credit products are scaling quickly. And yield-bearing protocols are attracting liquidity even in periods of price consolidation.
“These developments are not speculative bursts. They are structural changes. They show that the digital asset market is becoming a system-level layer of finance, not just a trading venue. For policymakers, this raises the question of how to integrate programmable dollars into regulated frameworks. For institutions, it raises the question of how to use these tools for treasury management and lending.”
According to Grachev, “The implication is that the true strength of this cycle will not come from Bitcoin’s price chart alone, but from the financial architecture being built underneath it.”
What Next?
In the absence of a crystal ball, the best we can do is say that the same factors tend to determine a cycle’s course. Namely macroeconomic conditions, geopolitics (read: trade tensions), and evolving industry regulations and developments.
Undoubtedly, recent improvements in infrastructure have bolstered investor confidence, so too the crypto-positive stance of the current U.S. administration. Liquidity is deep, ramps are regulated, and institutional inflows are extremely healthy. Crypto adoption has long since spread from in-the-know traders to everyday consumers and corporations.
The next markdown will come, of course; it always does. But distribution phases now see institutions rotate rather than panic-sell. Speculation is rife yet accumulation also builds on meaningful use cases, from payroll in USDT to remittances and tokenized treasuries. Anticipation for the next killer crypto use-case is high.
What does your gut tell you?
