We’re back to the days when bitcoin was worth $40,000. Ethereum is now back at $2k and smaller tokens are catching up with the megacaps just in time for Christmas.

The crypto market is a rollercoaster. Isn’t this a wild ride which keeps us on our feet and glued to screens? Market cyclicality is the catalyst for the creation and refinement of protocols and projects, while lesser ideas are either discarded or pushed aside by the market’s dramatic ups and downs.

These cycles are based on a combination of factors, including investor psychology, technological developments and regulatory changes that meet the demand for halving schedules. protocol forks, and ICOs. When these factors are aligned in a positive way, the demand for cryptocurrencies skyrockets, causing prices rocket upwards. This is often fuelled by FOMO, or fear of missing out (hype). This is the golden age of the bull markets, when we are euphoric and fearful of further price increases.

Subscribe to our weekly newsletter Crypto Long & Short for insights, news, and analysis for professional investors.

Every cycle has a duality, a yin to every yang. The infamous “crypto-winter” is here. This icy season begins when investors are overly leveraged and sentiment is too bullish. The result is a market that self-corrects. Prices plummet and investors panic. What are the indicators of this chilling period? Price declines that are prolonged, an increase in market volatility, decreased trading volumes and a general sense of despair among investors.

Where are we in the cycle? Why are we saying goodbye to crypto-winter and moving into warmer seasons?

Source: CoinDesk Indices

The CoinDesk Markets Index, which measures the entire market, has risen by 21%. Bitcoin is up 18% in the last month. CMI’s outperformance over bitcoin is a sign that people are choosing lower-cap altcoins. This performance is also a good cycle indicator, due to positive Bitcoin and Ether Trend Indices and the buzz surrounding spot exchange traded funds (ETFs). There’s a huge surge of inflows to crypto investment funds. Even meme-coins have made a comeback. The end of Sam Bankman Fried’s trial also gives the crypto-world a new start.

Why have we emerged from the deep freeze? It’s about a change in narrative. Wall Street has entered the scene in a big way, with billions of dollars invested through ETFs. They spin a story of mainstream institutions saving the day and making crypto more transparent for investors.

What is the focus? The focus now?

This change might upset some people, as it departs from the original crypto ethos of being an alternative to mainstream financial institutions. Hey, this is what’s re-igniting excitement. It’s not only Wall Street that is driving this. As Larry Fink said in his “flight to safety” comment, macro factors such as the end of the U.S. rate-hiking cycle, Middle East tensions, and the threat of long-term inflation push investors towards crypto. Fink, who was once a crypto-skeptic, is now praising Bitcoin on national television.

Where are we now in the new crypto cycle, assuming we’ve emerged from the deep freeze? We can tell from an analysis of past Bitcoin cycles, using the CoinDesk Bitcoin Price Index XBX, that we are on the right track to reach the next cycle’s highs.

According to an average of past cycles, it takes 700 days for a previous cycle low to be followed by a new cycle high, with drawdowns on average -80%. If November 21, 2022 is the previous cycle low then a new high would be sometime in Q3 2024. New highs will exceed previous cycle highs by a multiple 2-7 times.

Source: CoinDesk Indices

Aside from the massive cycle analysis caveats, it seems that we are out of another crypto-winter, thanks to a more broader institution adoption narrative, and a positive macroeconomic backdrop.

This holiday season, there are many things to be grateful for.

Benjamin Schiller is the editor.