A saying that you hear often in any financial market is: history doesn't repeat but it often rhymes. The patterns of subsequent market cycles are never quite the same but similar. How does the current price action compare to previous bear markets? And what lies behind the price numbers?

Sentiment was arguably never worse in the crypto markets than in the fall of 2022. The six months before had revealed mismanagement and downright fraud of big crypto companies, culminating in the downfall of FTX. Anti-crypto politicians in the US sharpened their knives. Prices were abysmal. But it wasn't much better in 2019. 

Comparing prices and sentiment

Let's focus on Ethereum prices and sentiment. How was this around the same time in the previous cycle, in early 2019? Not great. Ethereum had dropped a punishing 94% from the 2017 top. Much more than the 82% in the current cycle (while the percentages seem comparable, be aware that a drop of 94% in the current cycle would have meant sub $400 Eth prices!)  

The difference in sentiment? Back then, it was not clear even to insiders if Ethereum would even make it in terms of product market fit. The ICO boom and bust had left people disillusioned. Only staunch believers kept building and arguing that Ethereum had a future.

This is different now. While the regulatory uncertainty - in the US - stings, few people doubt that Ethereum will have a meaningful future. It completed its transition to proof-of-stake and layer 2 chains are being built at high pace to solve its scalability issue.

Comparing adoption numbers

In the bear market of 2018-2019, the number of active wallet addresses (across all chains) declined sharply from 7 million to around 2 million. In contrast, the number of addresses is currently higher than when prices peaked in late 2021 (15 million versus 12 million). The same goes for smart contracts, which are used in financial and NFT applications. This number has almost doubled since the bull market peak. 

In summary, people are increasingly using crypto, even if they have less money to spend on buying coins. This foundation of increased adoption is a bullish sign. Whenever the money printer will go brrr again, the prices have a solid foundation to move up from.