The cryptocurrency market is notoriously volatile, cycling between periods of explosive growth and sharp decline. Every so often these downturns descend into “crypto winters,” where prices plummet, optimism fades and projects freeze up.
Crypto Winter Definition
A crypto winter is a period of time when the cryptocurrency industry experiences market-wide value loss and stagnation, lasting anywhere from a few months to several years. Prolonged price drops, decreased trading activity and low investor interest are all signs that winter is on the horizon.
While crypto winters are not determined by any specific metrics or regulatory bodies, they’re typically associated with a steady drop in asset values and trading volumes, often lasting at least three months and driven by various factors. Bloated market bubbles, regulatory crackdowns, security breaches and headline-grabbing scandals have all played a role in triggering past crypto winters, with some still sorting through the aftermath years later.
In these icy conditions, investors are faced with several options: hold onto their assets, exit the market altogether or embrace the cold and buy into the dip.
What Is Crypto Winter?
A crypto winter refers to a prolonged period of decline in the cryptocurrency market. The term was originally coined in 2018 when Bitcoin, the most popular cryptocurrency, crashed. Now it is a commonly used phrase among financial journalists covering the crypto market’s status — most recently after the FTX exchange went under.
Crypto winters are typically marked by lasting double-digit percentage losses in asset value across multiple cryptocurrencies, resulting in reduced trading activity and negative investor sentiment. These bearish conditions often act as natural correction phases that follow speculative bubbles, and can last anywhere from a few months to several years.
What Causes a Crypto Winter?
Crypto winters are often caused by more than one factor. Regulatory crackdowns restricting trade, mining or the operation of crypto platforms — or even banning crypto altogether — are particularly severe events that directly impede the exchange of digital assets.
Other bad omens like high-profile scandals, scams and security breaches — as well as any reports of fraudulent activity or market manipulation — can send a chill through the decentralized market. These types of incidents expose the risks associated with cryptocurrencies, dissolving investor trust in the market.
Broader market trends, such as rising interest rates, global recessions and geopolitical instability can play a role, too. Since cryptocurrencies are considered speculative assets that are prone to overvaluation, they are often among the first to suffer during periods of economic uncertainty. Even seemingly smaller issues like overly congested networks and failed update launches can reduce investors’ risk appetite and undermine their confidence in blockchain technology as a whole.
Any combination of these misfortunes can make a bad situation worse, escalating a market crash blip into a lasting crypto winter.
How Long Do Crypto Winters Last?
Each crypto winter season varies, ranging from months to several years. For example, when Bitcoin crashed in 2018, the market cooled off for almost three years. However, the winter that followed lasted just 13 months, spanning from November 2021 to December 2022.
Signs of a Crypto Winter
Crypto winters can only be confirmed in hindsight, but these are some telltale signs that a frigid downturn may be just around the corner.
Prolonged Price Drops
The most damning sign of a crypto winter is the prolonged plunge in coin and token values over an extended period of time. These sharp declines are often driven by regulatory crackdowns, major project collapses or the bursting of speculative bubbles. While volatility is inherent to the crypto market, such events can trigger a domino effect, eroding confidence and causing prices to fall — and remain low — for the duration of the winter.
Decreased Trading Activity
The crypto market doesn’t close. Tokens are traded constantly, 24/7 around the world without interruption. So when there’s a widespread lull in trade volume, it’s an indicator of a market-wide chill. Less demand results in lower prices and stagnant holdings, as crypto investors brace for the cold.
Low Investor Interest
People only invest in an asset if they see a potential for high returns. In crypto — where past performance is too erratic for predictive analysis — this is often indicated by things like positive media coverage, blockchain innovations and favorable regulations. Institutional adoption and company endorsements also help create a bullish sentiment.
But when high-profile exits go public — like when Sequoia Capital marked down a $214 million investment following the FTX collapse, or when Tesla reversed its decision to accept Bitcoin as payment — these hits tend to decrease confidence, sparking a mass exodus.
Crypto Winter vs. Bear Market
While both terms signify financial downturns, it’s important to know the difference.
A bear market is a distinct event, defined by a 20 percent price drop from peak values in stocks, bonds and other traditional financial assets that’s brought on by a mix of economic factors. It’s a regular part of the market cycle that is often forecasted by valuation models.
Crypto winters, on the other hand, are much more ambiguous, given the volatility of a young market that has only been around for about 15 years. This period of deep value loss and stagnation has no official definition, but is generally marked by a consistent decline in the value of coins and tokens for more than three months. They are often tied to crypto-specific events, like regulatory crackdowns or collapsing exchanges, and can last for years, as they may take longer to recover public trust.
And while both a bear market and crypto winter may occur simultaneously, they’re entirely exclusive events without any real correlation.
A Brief History of Crypto Winters
The exact number of winters the crypto industry has been through is entirely subjective, but these are some more notable periods:
2011 - 2012, Mt. Gox gets hacked: After the initial surge in Bitcoin’s price — jumping from about $1 to nearly $30 in the span of two months — the market experienced a sharp decline tied to the hacking of now defunct exchange Mt. Gox, one of the largest platforms at the time. The price started to give way mid year, plummeting to $0.68 cents. This slump is considered to be the first crypto winter since Bitcoin’s launch in 2009.
2013 - 2015, Mt. Gox collapses: The collapse of Mt. Gox, which once handled 70 percent of all Bitcoin transactions, ushered in a harsh crypto winter when it disclosed the loss of 850,000 Bitcoins — valued at about half a billion dollars at the time. Following claims of theft and poor management, the exchange declared bankruptcy, taking the price of Bitcoin down from its peak of $1,100 to a low below $180, and another 15 months to recover.
2018, The ICO bubble bursts: Bitcoin hit an record high of $19,343 during a year-long bull run in 2017, largely driven by the launch of Initial Coin Offerings — a fundraising method that allowed blockchain-based startups to sell their newly issued tokens to investors in exchange for established cryptocurrencies. Then, the bubble burst. Within days, Bitcoin’s value sank 29 percent, marking the start of the crypto winter season. Over the next year, Bitcoin would fall 83 percent, bottoming out at less than $3,300.
2022 - 2023, FTX collapses: Following the downfall of the Terra-Luna token and collapse of major exchange platform FTX, Bitcoin plunged from $68,000 to less than $16,000 by late 2022, reflecting a 70 percent loss in value. Marketwide, this amounted to a $2 trillion crash. As innovative developments and regulatory clarity rebuilt trust in the digital economy, the period of stagnation lasted about 17 months, signaling one of the most challenging times in cryptocurrency history. Sam Bankman-Fried, the founder of FTX, was tried for fraud and conspiracy in 2023, then sentenced to 25 years in prison in 2024.
Frequently Asked Questions
What is crypto winter?
Crypto winter refers to a downturn period in the crypto market. It’s marked by declining cryptocurrency prices, reduced trading activity and bearish market sentiment.
How long will crypto winter last?
Each crypto winter varies in length, ranging from at least three months to several years.
What caused crypto winter?
Crypto winters are a byproduct of a combination of factors, including everything from market corrections and regulatory crackdowns to inflation and rising interest rates. High-profile scandals involving key crypto figures, as well as waning investor confidence, can collectively drive down cryptocurrency prices and activity.
How many crypto winters have there been?
There is no exact number of crypto winters, but the crypto community generally recognizes at least three major fallouts, spanning from the end of 2013 to 2015, all of 2018 and from 2022 to 2023.
