However, higher interest rates could abruptly crush those top tokens.
Many of the market’s top cryptocurrencies, including Bitcoin (CRYPTO: BTC) and Ethereum (CRYPTO: ETH), set record highs over the past year. That bullish stampede was driven by the newly approved spot price ETFs for Bitcoin and Ethereum, which brought in more institutional and retail investors; lower interest rates, which generated tailwinds for speculative investments; and the Trump administration’s more crypto-friendly policies. The devaluation of the U.S. dollar and other fiat currencies amplified those gains.
But as the crypto market heats up again, should investors be bracing for another crypto winter? The crypto market has already crashed three times over the past decade — in 2014, 2018, and 2022 — so it might be due for another downturn. Let’s weigh the bull and bear cases for the market to decide.
The bulls expect crypto prices to keep rising as interest rates decline, fiat currencies soften, and “blue chip” cryptocurrencies like Bitcoin and Ether are adopted as “digital gold.” The big institutional inflows into their spot price ETFs over the past year support that bullish thesis.
As more institutional investors, companies, and countries accumulate Bitcoin, it should be more widely used for mainstream payments. Other cryptocurrencies, especially stablecoins, should benefit from that shift toward digitally native payments. More real-world assets could also be tokenized on those blockchains for secure transactions.
Proof of stake (PoS) blockchains like Ethereum — which support the smart contracts used to develop decentralized apps (dApps), non-fungible tokens (NFTs), and other crypto assets — should draw in more developers. The growth of that ecosystem should challenge centralized app stores while stabilizing the prices of their underlying cryptocurrencies. Proof of work (PoW) blockchains like Bitcoin, which need to be mined, will continue to be valued by their scarcity.
As that happens, financial regulators should provide clearer rules for trading and spending cryptocurrencies. That clarity could spark even bigger institutional investments. Protracted geopolitical conflicts and macro headwinds could also make them appealing safe-haven plays.
Lastly, history doesn’t necessarily have to repeat itself. The three crypto winters of the past decade were mainly caused by technical failures, which weeded out the weaker tokens and exchanges.
