OpinionMarkets
|6 min ReadCycles and drawdowns: how markets fall and rise
Jax Morales
Senior Analyst
Published
Jan 16, 2026
The rule of drawdowns: cycles restart in pain
If you live in crypto long enough, you learn a hard truth. Every crisis and every drawdown often marks the start of the next cycle. Veterans who endured 9·4, 3·12, 5·19, and the latest 10·11 know this rhythm well. Time in crypto is short and the swings are wild, but the market keeps replaying the same script seen in bigger arenas like U.S. equities and A-shares. From a bubble peak, to a brutal flush, to a split recovery. The pattern returns again and again.
The past four years gave us a clear lesson. Starting in late 2021, global assets rolled off their highs. From 2023 to 2025, AI enthusiasm and a new rate path drove the repair. Today, U.S. stocks and crypto stand back near highs, while A-shares hover at the doorstep of recovery. This was a worldwide test of money flows, risk pricing, and nerves. Look at it through drawdowns and you see the real character of each market. Returns matter. Survival matters more. Everybody knows it.
2021 to 2025: one synchronized cycle, three answers
This was not a routine bull-bear turn. It was a rare three-market resonance. Liquidity moved from extreme ease to sharp tightness, then back toward balance. New crypto, mature U.S. stocks, and A-shares all ran the same three acts: boom, purge, repair.
At the peak in late 2021, cheap money pushed valuations to extremes. The Nasdaq set 16,200 on November 22, 2021. The S&P 500 hit 4,818 on January 4, 2022. Bitcoin topped at 69,000 dollars on November 10, 2021. Ether hit 4,868 dollars the same day. NFTs and DeFi dominated feeds. A-shares did not break records, but structural themes like carbon neutrality, new energy, and core consumer names kept the tape hot near 3,500 to 3,700.
Then the purge. A 40-year inflation shock brought the fastest Fed hiking cycle on record. Liquidity vanished. Risk assets fell together. Crypto suffered a chain of internal breaks in 2022. Terra and LUNA collapsed. Three Arrows failed. FTX imploded. Leverage, trust, and prices caved at the same time. Bitcoin slid to 15,476 dollars on November 21, 2022, a 77.5 percent drawdown. Ether bottomed earlier at 881 dollars on June 18, 2022, down 82 percent. U.S. stocks fell in an orderly way by comparison. The S&P 500 touched 3,491 intraday on October 13, 2022, a drop of about 27.5 percent. The Nasdaq hit 10,088 the same day, off about 38 percent. A-shares mixed global tightening with local pressures. The Shanghai Composite probed 2,860 in April and October 2022, then set a new cycle low at 2,635 on February 5, 2024. From the absolute high of 3,731 on February 18, 2021, the drawdown neared 30 percent. The fall was not the worst. The grind back was the test.
Next came the split recovery. As inflation topped and hikes slowed in 2023, markets began to mend. AI lit a fire under U.S. tech. Earnings surged and carried indexes beyond prior highs. The S&P 500 recaptured its peak on January 19, 2024. The Nasdaq did so on March 1, 2024. By October 14, 2025 close, the S&P 500 printed 6,644 and the Nasdaq 22,521, up about 38 percent and 39 percent from the last cycle highs. Crypto rebuilt after its flush. Spot Bitcoin ETFs pulled Wall Street into the plumbing. Bitcoin reversed in a clean V, broke 2021’s high, and reached 126,199 dollars. Ether returned to form later, setting a new record at 4,956 dollars in August 2025. Many altcoins did not come back. A few leaders like Solana, Sui, and TON enjoyed local bulls. Most others faded in a tighter liquidity world. A-shares moved last. Sentiment thawed slowly. Policy support helped. The Shanghai Composite finally pushed above 3,800 in August 2025 and began a careful climb.
Who absorbs the hit: profits, narratives, or policy
These three markets share one master switch. Dollar liquidity. All three peaked around 2021 Q4, all three bottomed around 2022 Q4. Open the gate and prices float. Close it and they sink. What happens after the bottom separates them.
The U.S. market runs on institutions and earnings. Liquidity drives the fall, profits drive the rebound. In 2022, stocks sold on valuation compression tied to inflation and rates. When fear faded, focus moved back to income statements. AI turned into real productivity and real profit. Big Tech delivered. A strong feedback loop formed between earnings and price. With deep rules and steady allocators, the system repaired fast.
Crypto runs on narratives and liquidity supply. It is a high-beta cycle asset with its own embedded leverage. When money is loose, it outruns everything. When money is tight, it caves harder. The ETF era also changed the map. With Bitcoin wired into Wall Street flows, the market split. A core pool of majors now soaks up most of the bid. Many alts became speculative islands. The old altcoin rising tide is rare. The returns shift from easy beta to selective alpha. The asset class is more institutional, still volatile, with thinner broad upside.
A-shares work through policy and confidence. The repair is a long debate between a policy floor and a market floor. Without a built-in earnings engine like U.S. megacaps or a new plumbing catalyst like Bitcoin ETFs, progress depends on restoring expectations. It takes time. It tests patience.
How to use the cycle: base, offense, and structure
A simple way to frame it. Use U.S. stocks as a base. Treat crypto as a cycle offense with leverage in its DNA. Approach A-shares as a structural strategy. Drawdowns tell you the truth about risk. They ask a single question. Can you last long enough to see the next phase.
From late 2021 to late 2025, the world ran one clean experiment. The same macro wave hit three very different boats. U.S. stocks fell in order and rose fast on profits. Crypto plunged deeper and rebounded higher, then split. A-shares sagged and only recently turned. In every case, the story that matters starts after the fall. You do not win a cycle by guessing tops. You win it by surviving the lows, sizing right, and letting the repair do its work. That is the play. Very simple. Very hard. Tremendous when it clicks.
Disclaimer: This document is intended for informational and entertainment purposes only. The views expressed in this document are not, and should not be taken as, investment advice or recommendations. Recipients should do their own due diligence, taking into account their specific financial circumstances, investment objectives and risk tolerance, which are not considered here, before investing. This document is not an offer, or the solicitation of an offer, to buy or sell any of the assets mentioned.