Bitcoin is up 28% in the last month. BTC exchange-trade funds (ETFs) are coming sometime soon. Crypto investment funds saw their largest weekly inflows last week since mid-2022. Meme coins are making a comeback. And the chastening trial of Sam Bankman-Fried is almost over, giving crypto the chance to start anew.
As we head into winter in North America, is "crypto winter" just about done?
It certainly looks like it.
Crypto winter isn't quite a technical term (like a "recession" is a fall in economic output for two successive quarters). There's no accepted definition. But anyone who is in crypto knows what it is and what it feels like. During winter, crypto prices are falling, crypto's critics are on the warpath, VC dollars dry up and everyone's looking for a new narrative.
Recently, that new narrative has returned.
Wall Street is getting into bitcoin in a big way, promising billions in new investment through ETF vehicles. The story is now about how mainstream institutions are going to save the digital assets industry, by making tokens safe for investors and bringing greater regulatory clarity. In the wake of FTX and other major scandals, it is said that the adults are coming back into the room, promising more focus on what actually works. Wall Street's agenda now is about finding sustainable products. It's all about ETFs, tokenized securities and stablecoins. Not the fluff-and-nonsense of meme coins and over-priced NFTs that we saw during the COVID-era run-up.
You may not like the new narrative, believing it departs from the purpose and origin story of crypto (which was to provide an alternative to mainstream finance). But it's assuredly the reason why people are getting excited about crypto again.
Part of this is driven by macro factors, like the instability of the Middle East and the renewed threat of inflation. Larry Fink, the CEO of BlackRock, described the recent rally in bitcoin as being driven by a "flight to quality" – the hunkering of investors for safety in times of uncertainty.
"I think there are more people running into a flight to quality whether that is in treasuries, gold or crypto – depending on how you think about it. And I believe crypto will play that type of role as a flight to quality," he told Fox Business earlier this month.
Fink, of course, used to be an avowed crypto skeptic, someone who was more interested in Bitcoin's environmental footprint than its potential as a safe-haven asset. Now this bellwether Wall Street figure is trumpeting Bitcoin live on national TV.
And actually crypto winter may have ended before last week, if we'd paid more attention. Warmer times were already on the way back in January, according to Noelle Acheson, the former head of research at CoinDesk and Genesis Trading, who now writes the "Crypto Is Macro Now" newsletter.
"Since [January], we've had significant regulatory progress outside the U.S., big legacy banks building crypto teams, new funds emerging with significant capital, broader tokenization experimentation and the deepening participation of both financial and technology giants in blockchain-related services," she tells me over email.
"It is true that the interest pick-up has been tentative in some quarters, and the regulatory landscape in the U.S. does not look warm and sunny, but for the crypto ecosystem as a whole, the 'green shoots' of spring have been evident for months," she adds.
"Since January, new layer 1s have emerged, layer 2 value has more than doubled, Google/Mastercard/Fidelity and other household names are diving deeper into crypto services, massive fund managers have tokenized products, and the largest asset managers in the U.S. are looking to create crypto-linked products. That is not at all wintery."
For investors and industry participants in the market who are still underwater, it may not seem like crypto winter has ended at all. But, squint squarely enough, and you might be able to see how market conditions are improving. There are sure to be ups and downs along the way, yet the trajectory for the industry now seems upwards rather than sideways and down.
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–Ben Schiller, managing editor
@btschiller
