Bitcoin and Ethereum Achieve Record Highs Amidst Broader Market Cyclical Recovery

Executive Summary

Global financial markets, encompassing US equities, A-shares, and cryptocurrencies, completed a notable four-year cycle from 2021 to 2025, characterized by a market peak, subsequent violent deleveraging, and a differentiated recovery. This period culminated in Bitcoin and Ethereum achieving new all-time highs, mirroring significant gains in US stock indices.

The Event in Detail

The 2021-2025 market cycle serves as a textbook example of "bubble peak, violent deleveraging, and differentiated recovery." Global assets, including Bitcoin and major US stock indices, peaked in late 2021. The subsequent period of 2022-2023 was marked by severe deleveraging, largely triggered by rapid Federal Reserve rate hikes. During this phase, Bitcoin experienced a retracement exceeding 77%, while Ethereum saw a decline of over 82%. This deleveraging was intensified by significant crypto-specific events, including the Terra/LUNA collapse in May 2022, which led to an estimated $60 billion market capitalization loss for LUNA and a broader market value reduction of $300-$400 billion. The crisis continued with the downfall of FTX in November 2022, exposing an $8 billion hole and triggering further market contagion.

The 2023-2025 phase saw a divergent recovery across markets. The US stock market, led by an AI narrative and tech giants like Nvidia, saw the S&P 500 reclaim its lost ground by January 19, 2024, and the Nasdaq Composite Index by March 1, 2024, both reaching new all-time highs. As of October 14, 2025, the S&P 500 closed at 6,644 points and the Nasdaq at 22,521 points, representing surges of 38% and 39% respectively from their 2021/2022 cycle highs. Concurrently, the cryptocurrency market, bolstered by the approval of Bitcoin spot ETFs, witnessed a significant rebound. Bitcoin prices exhibited a V-shaped reversal, surpassing 2021 highs to reach $126,199. Ethereum also surged, setting a new all-time high of $4,956 in August 2025.

Market Dynamics and Strategic Positioning

The observed market dynamics confirm the cyclical script of "peak, violent deleveraging, and differentiated recovery." According to MSX 研究院, US stocks are positioned as core portfolio assets, while cryptocurrencies are deemed "high-elasticity cyclical offensive assets" due to their amplified gains during liquidity surges and heightened losses during liquidity contractions. The A-share market, conversely, is characterized as a structural strategy-driven investment target. The increasing integration of Bitcoin ETFs with traditional finance is segmenting the crypto market, leading to a division between a "mainstream asset pool" and a diminishing "altcoin bull market dividend," as liquidity contraction has rendered many altcoins nearly defunct.

Broader Market Implications

The institutionalization of crypto assets has accelerated, driven by landmark regulatory clarity. The U.S. Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC)'s September 2025 Joint Statement, alongside the European Union's Markets in Crypto-Assets (MiCA) regulation, have dismantled legal uncertainties. This regulatory environment facilitated $17.8 billion in ETP inflows in the first half of 2025 alone. Institutions are now pursuing diversified strategies, with 73% holding non-Bitcoin/Ethereum tokens, leveraging stablecoin yield protocols offering 6.8–9.1% returns, and engaging in hybrid TradFi-DeFi models. The GENIUS Act, enacted in July 2025, imposed strict reserve backing for stablecoins, legitimizing them as safe-haven assets. This confluence of factors signals a transformation of crypto from speculative assets into strategic portfolio components, reshaping investor sentiment towards viewing macro-driven volatility as noise rather than a fundamental signal.

Expert Commentary

Frank of MSX 研究院 emphasizes that enduring drawdowns is essential to grasp cyclical opportunities, stating that "every crisis and drawdown often also marks the starting point of a new cycle." eToro market analyst Farhan Badami attributed a significant cryptocurrency market crash to "excessive optimism and leverage accumulation," leading to vulnerabilities during macro headwinds. Badami noted that the rapid recovery in Bitcoin and Ethereum indicates institutional buyers perceived the event as a buying opportunity rather than the onset of a bear market. He added that institutional conviction in these "blue-chip assets" remains strong, supported by their longer time horizons and deeper pockets, with adoption accelerating through spot ETFs and improving regulatory clarity.