Is it the crypto winter now? Market changes after regulatory reforms

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

Key Points

• The crypto winter follows this sequence: Major events → Trust collapse → Talent outflow
• Past winters were caused by internal issues; current fluctuations are driven by external factors; it is neither a 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 previous crypto winters occur?

Source: Tiger Research

The first winter appeared in 2014. At that time, Mt. Gox exchange 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 fundraising.

This ICO became the fuse for the next bull run. When anyone could issue tokens and raise funds, the boom of 2017 followed. Many projects raised billions based solely on whitepapers, but most lacked substantive content.

In 2018, regulatory policies in South Korea, China, and the US caused the bubble to burst, ushering in the second winter. This winter lasted until 2020. After COVID-19, liquidity surged, and DeFi protocols like Uniswap, Compound, and Aave gained attention, bringing funds back into the market.

The third winter was the harshest. After the Terra-Luna collapse in 2022, Celsius, Three Arrows Capital, and FTX failed sequentially. This was not just a price decline 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 funds into the crypto market.

2. Crypto winter pattern: Major events → Trust collapse → Talent outflow

All three winters followed the same pattern: major events occur first, then trust collapses, followed by talent outflow.

It always starts with a major event. For example, Mt. Gox hack, ICO regulatory reforms, Terra-Luna collapse, and subsequent FTX bankruptcy. The scale and form vary, but the result is the same: panic across the market.

The shock quickly spreads, causing trust to collapse. People who were discussing the next development phase begin to question whether cryptocurrencies are truly meaningful technology. Collaboration among developers evaporates, and blame-shifting begins.

Skepticism leads to talent outflow. Builders who once created new momentum in blockchain start to doubt. In 2014, they shifted to fintech and big tech companies. By 2018, they moved toward financial institutions and AI sectors. They leave in search of seemingly more stable opportunities.

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 outflow pressure: The AI industry is booming, 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, ICO scams, FTX collapse—these eroded industry trust.

The situation now is different.

ETF approval has sparked a bull market, while tariffs and interest rates 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 protection—new narratives keep emerging and are still being 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 talk of winter either.

4. Changes in market structure after regulation

Behind this is a major shift in market structure caused by regulation. The market has now split 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 sectors 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 gains like before. Volatility decreases, upside potential is limited, but downside risk is also constrained.

On the other hand, unregulated regions will become more speculative. Low entry barriers, rapid volatility. It’s more common to see 100x gains in a day and 90% drops the next.

But this sector is not without purpose. Industries born in unregulated zones are full of creativity. Once recognized, they enter the regulated zone. DeFi is an example, and prediction markets are now following suit. It’s like an experimental sandbox. But the boundary between unregulated and regulated sectors will become increasingly blurred.

Shared infrastructure includes stablecoins and oracles. They are used in both regulated and unregulated areas. Institutional RWA payments and Pump.fun trading both use the same USDC. Oracles provide data for tokenized bonds verification and anonymous DEX settlement.

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, two things remain.

First, new killer applications must emerge in the unregulated sector. They must create unprecedented value, like the “DeFi Summer” in 2020. AI agents, InfoFi, and on-chain social are candidates, but their scale is not yet enough to drive the entire market. We need to re-establish the process of experimental validation in the unregulated sector and then enter the regulated sector. 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 start building, if macro conditions are unfavorable, growth will remain limited. The “DeFi Summer” of 2020 was driven by liquidity released after COVID-19. 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 previous “crypto bull market” where all cryptocurrencies rose in sync is unlikely to happen again. Because markets are now differentiated. Regulated sectors grow steadily, while unregulated sectors experience large swings.

The next bull market will come, but not everyone will benefit.