Fintech

The bitcoin crash has people talking about another crypto winter

Volatile crypto prices have scared consumers and companies away from the sector before — sometimes for extended periods.

Crypto winter

“Crypto winter” is a prolonged period of flat trading following a price crash.

Illustration: Christopher T. Fong/Protocol

The sharp drop in cryptocurrency prices has spurred fears that the notoriously volatile industry is about to go through another prolonged slump.

The market cycle has become such a predictable pattern — a steep decline in coin prices followed by a prolonged period of flat trading — that it even has a catchy name: crypto winter.

“With this market drawdown, we are definitely in this similar territory of downturns we have seen in the past,” Chris McCann, a partner with Race Capital, told Protocol.

The most recent crypto winter happened around 2018 when bitcoin rallied to about $20,000 before a roughly two-year slide that saw it fall to under $5,000.

But crypto slumps have always been followed by sharp rallies, which drew more players and corporate investments to the space.

A good example is Robinhood, which introduced crypto in 2018. That bet seemed to pay off when crypto trading revenue juiced its earnings just in time for its IPO last year. But lately, falling crypto volume has been a drag on the stock.

At times, the crypto craze has led to quirky, even disastrous business maneuvers. The bitcoin rally in 2017 prompted the Long Island Iced Tea Corp. to rebrand itself as Long Blockchain. It ended up getting delisted from the Nasdaq last year.

The current slump began in early November when the total market value of all cryptocurrencies, having reached nearly $3 trillion, began sliding. They settled at around $1.6 trillion this week. The price of bitcoin has tumbled to around $36,000, after topping more than $67,000 late last year.

What's different now?

Is the current slump a buy-on-the-dip opportunity like the pandemic price crash in March 2020 or the May 2021 crash that also wiped out $1 trillion in value? Or is it a prelude to a prolonged period of flat trading like the markets saw in 2018 and 2019? It’s hard to tell with crypto, which has proven to be a particularly unpredictable market.

“If I could foresee the future I'd be in Las Vegas,” said Rob Siegel, a management lecturer at the Stanford Graduate School of Business.

But there are key changes that could be causing the heightened volatility, he said.

The rise in value of crypto assets was driven mainly by speculation and low interest rates. “In a world of largely 0% interest rates, capital was chasing returns,” he said. “Ergo, it flowed to riskier assets like crypto to get those returns.”

With the Fed signaling a new round of interest rate hikes, “capital is flowing back to less risky assets that will yield higher returns than they did previously,” Siegel said.

Meanwhile, he argued, questions remain about the long-term value of crypto assets. “The rise and fall of the crypto value in the near term tells us nothing of the long-term rise or fall of the asset class,” he said.

Bank of America urged investors to embrace a long view on crypto. In a note titled “Is another crypto winter here?”, bank analysts wrote that “direct exposure in crypto coins or tokens” should be “attractive only for highly risk-tolerant and speculative investors.”

These risk-tolerant investors now include big institutions, including major corporations. Chris Kline, co-founder and COO of Bitcoin IRA, noted that there are now more institutions dabbling in crypto, from major investment firms and hedge funds to companies like Tesla, Block, MicroStrategy and Coinbase that have billions of dollars in bitcoin on their balance sheets.

“This sell-off is not the same as others,” he told Protocol. “Unlike past rallies that were primarily retail, the inclusion of larger institutions can affect price moves differently. ... This is uncharted territory for crypto as we enter a new phase in its lifecycle with attraction from big players, hedge funds and even governments signaling that they are open to this asset class.”

HODLing for warmth

Still, for the crypto faithful, the sell-off is an accepted part of an industry where investors are encouraged to “hold on for dear life” and embrace the long view.

“If you're going to invest in bitcoin, a short-time horizon is four years, a mid-time horizon is 10 years. The right time horizon is forever,” MicroStrategy CEO Michael Saylor told Bloomberg.

McCann argued that downturns are “usually the best time to build and invest because only the true believers can stick through this kind of volatility and focus on building.”

“These times are what separates the wheat from the chaff,” he said.

Fintech

Judge Zia Faruqui is trying to teach you crypto, one ‘SNL’ reference at a time

His decisions on major cryptocurrency cases have quoted "The Big Lebowski," "SNL," and "Dr. Strangelove." That’s because he wants you — yes, you — to read them.

The ways Zia Faruqui (right) has weighed on cases that have come before him can give lawyers clues as to what legal frameworks will pass muster.

Photo: Carolyn Van Houten/The Washington Post via Getty Images

“Cryptocurrency and related software analytics tools are ‘The wave of the future, Dude. One hundred percent electronic.’”

That’s not a quote from "The Big Lebowski" — at least, not directly. It’s a quote from a Washington, D.C., district court memorandum opinion on the role cryptocurrency analytics tools can play in government investigations. The author is Magistrate Judge Zia Faruqui.

Keep Reading Show less
Veronica Irwin

Veronica Irwin (@vronirwin) is a San Francisco-based reporter at Protocol covering fintech. Previously she was at the San Francisco Examiner, covering tech from a hyper-local angle. Before that, her byline was featured in SF Weekly, The Nation, Techworker, Ms. Magazine and The Frisc.

The financial technology transformation is driving competition, creating consumer choice, and shaping the future of finance. Hear from seven fintech leaders who are reshaping the future of finance, and join the inaugural Financial Technology Association Fintech Summit to learn more.

Keep Reading Show less
FTA
The Financial Technology Association (FTA) represents industry leaders shaping the future of finance. We champion the power of technology-centered financial services and advocate for the modernization of financial regulation to support inclusion and responsible innovation.
Enterprise

AWS CEO: The cloud isn’t just about technology

As AWS preps for its annual re:Invent conference, Adam Selipsky talks product strategy, support for hybrid environments, and the value of the cloud in uncertain economic times.

Photo: Noah Berger/Getty Images for Amazon Web Services

AWS is gearing up for re:Invent, its annual cloud computing conference where announcements this year are expected to focus on its end-to-end data strategy and delivering new industry-specific services.

It will be the second re:Invent with CEO Adam Selipsky as leader of the industry’s largest cloud provider after his return last year to AWS from data visualization company Tableau Software.

Keep Reading Show less
Donna Goodison

Donna Goodison (@dgoodison) is Protocol's senior reporter focusing on enterprise infrastructure technology, from the 'Big 3' cloud computing providers to data centers. She previously covered the public cloud at CRN after 15 years as a business reporter for the Boston Herald. Based in Massachusetts, she also has worked as a Boston Globe freelancer, business reporter at the Boston Business Journal and real estate reporter at Banker & Tradesman after toiling at weekly newspapers.

Image: Protocol

We launched Protocol in February 2020 to cover the evolving power center of tech. It is with deep sadness that just under three years later, we are winding down the publication.

As of today, we will not publish any more stories. All of our newsletters, apart from our flagship, Source Code, will no longer be sent. Source Code will be published and sent for the next few weeks, but it will also close down in December.

Keep Reading Show less
Bennett Richardson

Bennett Richardson ( @bennettrich) is the president of Protocol. Prior to joining Protocol in 2019, Bennett was executive director of global strategic partnerships at POLITICO, where he led strategic growth efforts including POLITICO's European expansion in Brussels and POLITICO's creative agency POLITICO Focus during his six years with the company. Prior to POLITICO, Bennett was co-founder and CMO of Hinge, the mobile dating company recently acquired by Match Group. Bennett began his career in digital and social brand marketing working with major brands across tech, energy, and health care at leading marketing and communications agencies including Edelman and GMMB. Bennett is originally from Portland, Maine, and received his bachelor's degree from Colgate University.

Enterprise

Why large enterprises struggle to find suitable platforms for MLops

As companies expand their use of AI beyond running just a few machine learning models, and as larger enterprises go from deploying hundreds of models to thousands and even millions of models, ML practitioners say that they have yet to find what they need from prepackaged MLops systems.

As companies expand their use of AI beyond running just a few machine learning models, ML practitioners say that they have yet to find what they need from prepackaged MLops systems.

Photo: artpartner-images via Getty Images

On any given day, Lily AI runs hundreds of machine learning models using computer vision and natural language processing that are customized for its retail and ecommerce clients to make website product recommendations, forecast demand, and plan merchandising. But this spring when the company was in the market for a machine learning operations platform to manage its expanding model roster, it wasn’t easy to find a suitable off-the-shelf system that could handle such a large number of models in deployment while also meeting other criteria.

Some MLops platforms are not well-suited for maintaining even more than 10 machine learning models when it comes to keeping track of data, navigating their user interfaces, or reporting capabilities, Matthew Nokleby, machine learning manager for Lily AI’s product intelligence team, told Protocol earlier this year. “The duct tape starts to show,” he said.

Keep Reading Show less
Kate Kaye

Kate Kaye is an award-winning multimedia reporter digging deep and telling print, digital and audio stories. She covers AI and data for Protocol. Her reporting on AI and tech ethics issues has been published in OneZero, Fast Company, MIT Technology Review, CityLab, Ad Age and Digiday and heard on NPR. Kate is the creator of RedTailMedia.org and is the author of "Campaign '08: A Turning Point for Digital Media," a book about how the 2008 presidential campaigns used digital media and data.

Latest Stories
Bulletins