Tiger Research: What's different about this crypto winter? 】 Author: Ryan Yoon Compiled: Deep Tide TechFlow Deep Tide Introduction: The market has entered a downward cycle, and doubts about the cryptocurrency market are growing. Tiger Research believes that this time is different from the past: the previous winter was triggered by internal issues (such as the theft of Mt. Gox, ICO scams, and FTX crashes), while the rise and fall this time are all driven by external factors (such as the bull market brought by ETF approvals, and the decline caused by tariff policies and interest rates). After regulation, the market has split into three layers: compliance zone, non compliance zone, and shared infrastructure, and funds no longer flow in a "trickle down effect" as they did in the past. ETF funds remain in Bitcoin and no longer flow towards altcoins. The next bull market requires two conditions: the emergence of killer applications in non compliant areas and a shift in macro environment support. The full text is as follows: As the market enters a downturn cycle, doubts about the cryptocurrency market are growing. The current question is whether we have entered the encryption winter. The core viewpoint of the encryption winter follows a sequence: major events → trust collapse → talent loss. The past winter was caused by internal problems; The current fluctuations are driven by external factors; It's neither winter nor spring. After regulation, the market splits into three layers: compliance zone, non compliance zone, and shared infrastructure; The trickle down effect disappears and ETF funds remain in Bitcoin; The next bull market without leaving the compliance zone requires killer use cases and supportive macro environment. 1. How did the previous encryption winters unfold? The first cold winter occurred in 2014. Mt. Gox was the exchange that handled 70% of the global Bitcoin trading volume at that time. About 850000 BTC have disappeared in a hacker attack, causing a collapse in market trust. A new exchange with internal control and audit functions has emerged, and trust is beginning to recover. Ethereum has also entered the world through ICO, opening up new possibilities for vision and financing methods. This ICO became the spark for the next bull market. The prosperity of 2017 was ignited when anyone could issue tokens and raise funds. With just one white paper, tens of billions of projects have been raised, but most of them lack substantial content. In 2018, South Korea, China and the United States poured out regulatory measures, the foam burst, and the second cold winter came. This winter did not end until 2020. After COVID, liquidity flooded in, and DeFi protocols such as Uniswap, Compound, and Aave received attention, causing funds to flow back. The third cold winter is the most severe. When Terra Luna collapsed in 2022, Celsius, Three Arrows Capital, and FTX went bankrupt one after another. This is not a simple price drop; The structure of the industry itself has been shaken. In January 2024, the US SEC approved spot Bitcoin ETFs, followed by Bitcoin halving and Trump's pro crypto policies, and funds began to flow in again. 2. Encryption Winter Mode: Major Events → Trust Collapse → Talent Loss All three winters follow the same sequence. Major events occur, trust collapses, and talent leaves. It always starts with major events. Mt. Gox hack, ICO regulation, and FTX bankruptcy after Terra Luna crash. The scale and form of each event are different, but the outcome is the same. The entire market was in shock. The shock quickly spread to a breakdown of trust. Those who have been discussing what to build next are beginning to question whether cryptocurrency is truly a meaningful technology. The atmosphere of cooperation among builders has disappeared, and they have started blaming each other for who is responsible. Doubt leads to talent loss. The builders who have been creating new momentum in blockchain are now in doubt. In 2014, they turned to fintech and large tech companies. In 2018, they turned to institutions and AI. They went to places that seemed more certain. 3. Is it currently an encryption winter? The pattern of encryption winter in the past can also be seen today. Major event: Trump's tariff policy triggers market volatility, Federal Reserve's interest rate policy shifts towards overall decline in cryptocurrency market, trust collapses: skepticism spreads within the industry. The focus shifts from what to build next to mutual blame. Talent loss pressure: The AI industry is growing rapidly. Promise faster exit and greater wealth than encryption. However, it is difficult to call this the crypto winter. The past cold winter erupted from within the industry. Mt. Gox was hacked, most ICO projects were exposed as scams, and FTX collapsed. The industry itself has lost trust. Now it's different. The approval of ETFs has initiated a bull market, while tariff policies and interest rates have driven a decline. External factors have lifted the market, while external factors have also lowered the market. The builders have not left either. RWA, perpDEX (decentralized exchange for perpetual contracts), predictive market InfoFi、 Privacy. New narratives continue to emerge, and they are still being created. They haven't driven the entire market like DeFi has, but they haven't disappeared either. The industry has not collapsed; The external environment has changed. We did not create spring, so there is no winter. 4. Changes in market structure after regulation. Behind this is a significant transformation in market structure after regulation. The market has split into three layers: 1) compliance zone, 2) non compliance zone, and 3) shared infrastructure. The compliance zone includes RWA tokenization, exchanges, institutional custody, predictive markets, and compliance based DeFi. They undergo audits, disclose information, and receive legal protection. Slow growth, but large and stable capital scale. However, once entering the compliance zone, it is difficult to expect explosive returns like in the past. Reduced volatility and limited upward space. But the downside risks are also limited. On the other hand, non compliant areas will become more speculative in the future. Low entry threshold and fast speed. Within one day, 100 times, and the next day -90% of cases will occur more frequently. However, this space is not meaningless. Industries born in non compliant areas are creative, and once validated, they will enter compliant areas. DeFi has achieved this, and the prediction market is currently doing so. It serves as an experimental field. But the non compliant area itself will become increasingly separated from the compliant area business. Shared infrastructure includes stablecoins and oracles. They are used in both compliant and non compliant areas. The same USDC is used for institutional RWA payments and also for Pump.fun trading. The oracle machine provides data for the verification of token treasury bond, and also provides data for anonymous DEX clearing. In other words, as the market splits, the flow of funds also changes. In the past, when Bitcoin rose, altcoins also rose through the trickle down effect. It's different now. The institutional capital entering through ETFs remains in Bitcoin, so far. Compliance zone capital does not flow into non compliance zones. Liquidity only stays where value has been proven. Even Bitcoin, compared to risky assets, has not yet proven its value as a safe haven asset. The regulatory conditions for the next bull market are already being sorted out. The builders are still building. So there are still two things left. Firstly, new killer use cases must emerge from non compliant areas. Create something that didn't exist before, like the 2020 DeFi Summer. AI agents, InfoFi, and on chain social networking are candidates, but they have not yet reached the scale to drive the entire market. The process of verifying experiments in non compliant areas and entering compliant areas must be recreated. DeFi has achieved this, and the prediction market is currently doing so. Secondly, the macroeconomic environment. Even if regulation is completed, builders are building, and infrastructure is accumulating, if the macroeconomic environment does not support it, the upward space is still limited. The DeFi Summer of 2020 erupted during the release of liquidity after COVID. The rise after the approval of ETFs in 2024 also coincides with expectations of interest rate cuts. No matter how the cryptocurrency industry performs, it cannot control interest rates and liquidity. In order to make the industry's construction convincing, the macroeconomic environment must shift. The 'crypto season' where everything rises together like in the past is unlikely to happen again. Because the market has already split. The compliant area is steadily growing, while the non compliant area is experiencing significant fluctuations. The next bull market will come. But it won't come for everyone.