Crypto Quarterly is The Logic’s recurring series assessing the overall state of the crypto market, with a focus on Bitcoin, Ethereum, Flow and Cosmos’s Atom, four cryptocurrencies with strong ties to Canada.

Revered investor Warren Buffett is no fan of Bitcoin, once calling it “rat poison squared.” But in 2023, his famous advice to be greedy when others are fearful paid off handsomely for Bitcoiners.

In a year dominated by negative headlines—the collapse of American crypto-friendly banks, the conviction of former FTX CEO Sam Bankman-Fried on fraud charges, the dearth of venture capital as investors pivoted to AI—Bitcoin soared. The digital asset returned about 155 per cent over the course of the calendar year, running laps around the S&P 500’s 24 per cent increase over the same period.

The crypto winter, like this year’s actual winter, is looking unseasonably warm. Call it the crypto El Niño—and thank BlackRock’s Larry Fink and the investment firm’s recently approved Bitcoin ETF.

“The year started out pretty crappy,” said Mauricio Di Bartolomeo, co-founder and chief strategy officer at the Toronto-based crypto lender Ledn. “It was a winter right up until about Q3. And the theme of the latter half of the year was really the ETF.”

Bitcoin ETFs started trading in the U.S. for the first time earlier this month, capping off anticipation that had been growing since BlackRock’s iShares unit applied in June to launch one. Fidelity, Franklin Templeton and other financial giants now have their own Bitcoin ETFs as well, a major change from early 2021 when integration between crypto and the financial system was rare.

The anticipation and launch of the Bitcoin ETFs also changed the narrative about the digital asset sector as a whole. Mark Connors, head of research at the Toronto-based digital asset management firm 3iQ, has dubbed 2023 the year the market went “from cargo shorts to federal courts,” a reference to Bankman-Fried’s preferred legwear and an August federal appeals court ruling that ordered the U.S. Securities and Exchange Commission to review a Bitcoin ETF application again, after denying it and every other similar application for years.

Connors said it’s important to remember the 2022 crypto crashes, caused by the dual collapses of the stablecoin Terra and Bankman-Fried’s FTX, to explain 2023’s above-average year-over-year returns. Crypto experienced a point in its lifecycle similar to the year following the 2008 financial crisis or the dot-com crash of 2000, he said.

“2022 was crypto’s default cycle,” Connors said. “The reason why you see that huge difference is because crypto was at a March 2009 level and traditional markets were not.”

The price increase in digital assets buoyed Canadian crypto stocks as well. Bitcoin miners Hive, Hut 8 and Bitfarms returned between 196 and 564 per cent over the course of the calendar year, while Ether Capital, Galaxy Digital and WonderFi all saw price increases of over 100 per cent—a remarkable change from 2022, when crypto price crashes decimated the valuations of many Canadian companies in the sector.

While Bitcoin’s surge was the big story of 2023, buzz and trading volume is returning to other tokens as traders speculate about whether other crypto ETFs are coming. Solana, in particular, has seen a major price revival after being derided for its connection to Bankman-Fried.

“Every cycle, we’ve seen this. Bitcoin is the leading indicator,” said Kevin Callahan, CEO of the Toronto- and San Francisco-based Web3 startup Uniblock. “Then that exuberance starts to look further out the risk curve and says, ‘OK, where’s the next opportunity?’”

Callahan said data from use of his company’s software indicates developers are returning to the sector, another indicator the crypto El Niño could be poised to give way to another crypto boom.

“We’ve gone through this one-and-a-half-year hellscape,” he said. “I feel as though the clouds are lifting and the sun is starting to shine.”