Is this the crypto winter? Market changes after regulatory reforms

This report is authored by Tiger Research. As the market enters a downtrend cycle, skepticism toward the cryptocurrency market is growing. The current question is: Have we already entered a crypto winter? Key Points

• The crypto winter follows this sequence: Major events → Trust collapse → Talent loss
• Past winters were caused by internal issues; current fluctuations are driven by external factors; neither a true winter nor an early spring.
• Post-regulation market is divided into three layers: regulated regions, unregulated regions, and shared infrastructure; the drip effect has disappeared.
• ETF funds remain in Bitcoin and do not flow out of regulated regions.
• The next bull market requires killer applications and favorable macroeconomic conditions.

1. How did past crypto winters occur?

Source: Tiger Research The first winter appeared in 2014. At that time, Mt. Gox handled 70% of global Bitcoin trading volume. A hacker attack caused about 850,000 Bitcoins to vanish, leading to a collapse in market trust. Subsequently, new exchanges with internal controls and audit mechanisms emerged, and trust began to recover. Ethereum also entered the market through ICOs, opening new possibilities for vision and financing. This ICO became the trigger for the next bull run. When anyone could issue tokens and raise funds, the prosperity of 2017 followed. Many projects raised billions of dollars based solely on whitepapers, but most lacked substantive content. In 2018, regulatory policies were introduced in South Korea, China, and the US, causing the bubble to burst and the second winter to arrive. This winter lasted until 2020. After COVID-19, liquidity flooded in, and DeFi protocols like Uniswap, Compound, and Aave gained attention, bringing capital back into the market. The third winter was the harshest. After the Terra-Luna collapse in 2022, Celsius, Three Arrows Capital, and FTX successively went bankrupt. This was not just a decline in token prices but a shock to the entire industry structure. In January 2024, the US Securities and Exchange Commission (ETF) approved a spot Bitcoin ETF, followed by Bitcoin halving and the introduction of pro-cryptocurrency policies by Trump, leading to another influx of capital into the crypto market. 2. Crypto winter pattern: Major events → Trust collapse → Talent loss All three winters follow the same pattern: major events occur first, then trust collapses, followed by talent loss. It always starts with a major event. For example, the Mt. Gox hack, ICO regulatory reforms, Terra-Luna collapse, and subsequent FTX bankruptcy. The scale and form of each event vary, but the result is the same: panic spreads across the market. The impact quickly spreads, leading to trust collapse. People who were discussing the next development step begin to question whether cryptocurrencies are truly meaningful technology. Cooperation among developers evaporates, and blame starts to fly, with everyone pointing fingers. Skepticism leads to talent loss. Builders who once created new momentum in blockchain start to doubt. In 2014, they shifted to fintech and big tech companies. In 2018, they moved toward financial institutions and AI. They leave in search of more stable environments. 3. Is it a crypto winter now? The pattern of past crypto winters is still visible today.

• Major events:

  • Trump Meme coin issuance: Market cap soared to $27 billion in one day, then plummeted 90%.
  • 10.11 Liquidation event: The US announced a 100% tariff on Chinese goods, triggering Binance’s largest liquidation ($19 billion).

• Trust collapse: Skepticism is spreading within the industry. Focus shifts from product development to mutual accusations.

• Talent loss pressure: The AI industry is developing rapidly, promising faster exits and greater wealth than crypto.

However, it’s hard to call this a crypto winter. Past winters often stemmed from internal industry issues. Mt. Gox hack, most ICO scams, FTX collapse—these eroded industry trust. The situation is different now. ETF approval has sparked a bull market, while tariffs and interest rate policies have caused declines. External factors have both pushed up and pulled down the market.

Source: Tiger Research Builders have not left yet. Real-world assets (RWA), perpetual decentralized exchanges (PerpDEX), prediction markets, InfoFi, privacy protections—new narratives keep emerging and continue to be created. While they haven’t shaken the entire market like DeFi, they haven’t disappeared either. The industry hasn’t collapsed; what has changed is the external environment. We never created spring, so there’s no such thing as winter. 4. Changes in market structure after regulation This reflects a major shift in market structure brought by regulation. The market has divided into three layers: 1) regulated regions, 2) unregulated regions, and 3) shared infrastructure.

Source: Tiger Research Regulated areas include RWA tokenization, exchanges, institutional custody, prediction markets, and compliant DeFi. These areas require audits, disclosures, and legal protections. Growth is slow but capital is large and stable. However, once in the regulated zone, it’s hard to achieve explosive returns like before. Volatility decreases, upward potential is limited, but downward risk is also constrained. On the other hand, unregulated areas will become more speculative in the future. Low entry barriers and rapid volatility are common. It’s not unusual for prices to rise 100x in a day and then fall 90% the next. But this sector is not without meaning. Industries born in unregulated zones are full of creativity. Once recognized, they tend to enter regulated areas. DeFi is an example, and prediction markets are now following suit. It’s like a testing ground. But the line between unregulated and regulated industries will become increasingly blurred. Shared infrastructure includes stablecoins and oracles. They are used in both regulated and unregulated zones. Institutional RWA payments and Pump.fun trading both use the same USDC. Oracles provide data for tokenized bonds verification and anonymous DEX settlements. In other words, as markets differentiate, capital flows also change. In the past, when Bitcoin rose, other cryptocurrencies also increased via the drip effect. But now, institutional capital entering through ETFs remains in Bitcoin and stops there. Funds in regulated regions do not flow into unregulated areas. Liquidity stays where value is verified. Even so, Bitcoin’s value as a safe asset relative to risk assets has yet to be proven. 5. Conditions for the next bull market Regulatory issues are gradually being resolved. Developers are still building. So, only two things remain. First, new killer applications must emerge in the unregulated sector. They must create unprecedented value, like the “DeFi Summer” of 2020. AI agents, InfoFi, and on-chain social are candidates, but their scale is insufficient to drive the entire market. We need to re-establish verified experimental results in the unregulated sector and facilitate their entry into regulated areas. DeFi has achieved this, and prediction markets are now doing the same. Second, macroeconomic environment is crucial. Even if regulatory issues are resolved and developers continue building, if macroeconomic conditions are unfavorable, growth will remain limited. The “DeFi Summer” of 2020, fueled by liquidity release after COVID-19, saw explosive growth. The rise after ETF approval in 2024 also coincides with market expectations of rate cuts. No matter how well the crypto industry performs, it cannot control interest rates and liquidity. For the industry to gain recognition, macroeconomic conditions must improve. The kind of synchronized crypto bull market where all cryptocurrencies rise together is unlikely to happen again. Because markets are now divided. Regulated areas grow steadily, while unregulated areas experience large fluctuations. The next bull market will eventually arrive, but not everyone will enjoy it.