This article comes from Grayscale, original author: Matt Maximo & Michael Zhao, compiled by Odaily translator Katie Ku.

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Crypto Market Four Cycles

Like traditional economic and financial markets, crypto has cycles of ups and downs. On average, a crypto market cycle lasts about 4 years or about 1275 days. We can use the bitcoin price as a parameter to quantitatively define the period by realizing that the price is lower than the market price (the current trading price of the asset). From a qualitative perspective, each cycle marks an advancement in product and adoption, providing a springboard for the next cycle.

• The following outlines the situation since the start of the crypto market cycle in 2012:

  2012-2015: Hacking Era + Ethereum Startup

• The main theme of this cycle is the proliferation of new crypto exchanges and wallets.

  2016-2019: The Age of ICO Experimentation & the Birth of DeFi

• Prices fell more sharply, but the sell-off didn't devastate the entire market. Instead, capital has turned to stablecoins and ICO tokens. Laid the foundation of DeFi Summer.

  The theme of the 2020 market cycle is leverage as investors start to leverage up.

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The prices of digital assets represent only a portion of the broader ecosystem that is developing in the crypto industry. While Bitcoin's price fluctuates alongside traditional financial assets during times of market uncertainty, its underlying network continues to function as designed and is on track to process nearly $18 trillion worth of assets this year, up from $13 trillion in 2021 USD, as shown in the figure below. Mexico is the third-largest recipient of remittances and one of many countries turning to the technology. Mexico-based cryptocurrency exchange Bitso has seen a 4-fold increase in cross-border remittances between the first quarter of 2021 and the first quarter of 2022.

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Bitcoin Network Value Transfer (USD)

The 30-day exchange net position change (a measure of the amount of bitcoin on centralized exchanges) experienced the largest outflows on record in June 2022, indicating that holders are moving their bitcoins from exchanges and centralized lending platforms transfer. This suggests that investors may be wary of placing funds in centralized lending platforms, which employ riskier strategies when using user funds that could lead to liquidity issues. Instead, users appear to be choosing to passively hold their digital assets.

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Many of these outflows may have been due to investors taking advantage of the opportunity to add to positions at a discount. The number of wallet addresses holding BTC has increased sharply, reaching an all-time high. This marks an interesting shift in market sentiment, as investors with small capitals have historically reduced their position sizes when they are uncertain about market conditions — especially in 2018 when bitcoin prices fell from about $20,000 back.

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Bitcoin: small holder balance

The transparency of on-chain activity also gives market participants insight into the status of these institutions, which traditional markets can be more opaque - giving the market time to prepare and adjust for potential liquidations. Despite capital outflows as users deleverage, total borrowing on lending platforms like Aave and MakerDAO remains higher than in early 2022.

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Decentralized Lending Platform Borrowing Total (ETH)

Among them, the liquidity of stablecoin trading pairs is also higher than that of centralized exchanges. Uniswap’s liquidity on USDC/USDT trading pairs is almost 5.5 times that of Binance.

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In the face of market volatility, the monthly trading volume of DEX also remained stable. In June 2021, DeFi almost lost its status, while DEX processed billions of dollars in transaction volume. As of June 2022, DEXs on Ethereum have the same trading volume as Uniswap, with around $75 billion. DEX trading volume in July 2022 is also on par with February 2022, when the price of Ethereum was about 2.5 times higher, at about $2,800 and $1,100, respectively.

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Ethereum decentralized transaction volume (USD)

The Metaverse is one of the fastest-growing categories in crypto, with more than 230 assets worth over $11 billion, according to CoinMarketCap. Axie Infinity, a blockchain game built on Ethereum, has more than 778,000 active addresses playing the game in the past 30 days. Incumbents are also becoming interested in the interaction between crypto and gaming entertainment. Blockchain game developer Gala games recently partnered with Fortnite studio Epic Games. The partnership between Gala and Epic Games will provide easy access and reach to over 194 million users in what may be their first-ever blockchain-based video game, a major step forward for the industry.

As the chart below shows, despite exponential growth in network usage, protocol revenue was flat (daily active transactions) after the network upgrade. While protocol revenue is important, development doesn't always depend on it. Taking Filecoin as an example, this upgrade expands the network and continues to provide file storage at a cost of only 0.001% of the cost of Amazon S3 cloud storage file storage.

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Summarize

Summarize

Every market cycle that the crypto industry goes through makes this ecosystem stronger. This market cycle has provided us with “stress-tested” DeFi, infrastructure protocols, innovations in solutions at scale and a growing Metaverse industry, among others. Despite price drops, liquidations, and volatility, the crypto industry continues to build and innovate, pushing the boundaries of the industry.

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https://cointelegraph.com/news/crypto-winter-has-250-days-left-if-the-market-cycle-repeats-grayscale