Crypto Winter Can Thaw In 2022

Many people assume that the phrase “crypto winter” originated from the well-known television program Game of Thrones.

However, it’s used in cryptocurrency to denote a protracted bearish phase, in which values remain down for a considerable amount of time, rather than a period of ongoing warfare.

When crypto prices started to fall earlier this year, the current crypto winter began to set in. Sadly, it’s still too early to predict when the market’s ongoing downward trend will come to a stop.

IMAGE: UNSPLASH

Why Did Crypto Winter Occur?

The crypto market may have turned earlier in the year as a result of many factors, including high inflation, increasing interest rates, and the financial turbulence brought on by the conflict in Ukraine.

Therefore, people need money, even need 100 dollars now to live, but smarter people can invest this money.

The market appeared to be on the chilly side after the May collapse of the stablecoin UST and its sibling token LUNA, as well as the June suspension of withdrawals by the crypto lending site Celsius.

This year, the crypto market suffered several setbacks.

Is A Crypto Winter Underway?

The phrase “crypto winter” refers to a sharp and protracted decline in the value of cryptocurrencies. More than simply a bear market exists here. Prices might drop by up to 50% or more and stay low for several months.

Because of how uncommon that kind of decline is in conventional financial markets, a new phrase has been coined to describe it. The phrase “crypto winter” was first used by the news outlet Bloomberg in December 2018 when they claimed that Bitcoin had entered it.

When there have been significant price declines in the cryptocurrency market and a rebound is not anticipated soon, this phrase is now often employed. In addition, there are still some problems with the use of cryptocurrency and its taxation, in particular in the USA.

Now that Bitcoin is 70% below its all-time high from November 2021, it is safe to state that the cryptocurrency market is experiencing winter.

Having said that, you may be wondering how long this difficult phase might stay and what you can do to survive the icy crypto markets, like many others. We examine the subject in more detail in this article.

Crypto Winter: Finding Solace In 2018

It took over two years for BTC and Ethereum (ETH) to recover their losses from their high in December 2017.

Despite this, since the start of the COVID-19 epidemic, BTC and other significant cryptocurrencies like ETH have been among the best-performing assets across all markets.

Since its March 2020 bottom, the S&P500 has recovered by around 70%, whereas BTC has increased by almost 450% and, according to Statista, continues to be the most popular cryptocurrency.

In the same time frame, ETH has increased by more than 1200%. This is true even though both cryptocurrencies have fallen by over 50% from their record highs (ATHs). It is a sign of the rising interest among investors.

Price Development Of The Top 100 Cryptocurrencies As Of November 10, 2022

IMAGE: STATISTA

In reality, BTC has already seen the four-bear cycle before the 2018 crypto winter. Every time it has been close to a new ATH, it has wisely recovered.

In addition, these bear phases have often lasted three months to a year or longer before the start of the subsequent bull phase, which increased bitcoin usage and the value of cryptocurrencies.

This fact will provide long-term value investors a lot of reassurance even though volatility is still rampant across the board for the full pool of cryptocurrencies that are now accessible.

Blue-chip cryptocurrencies, when examined over five years, have never failed to produce market-beating returns as long as you have a long-term investing horizon.

Will 2022 Be Unique?

The reasons behind the present decline are different from those in previous cycles. Yes, hacks still happen, but they tend to be of a lesser scale.

Yes, institutions are still making investments in the cryptocurrency markets, but they prefer to buy rather than short. Investors have adjusted considerably to anticipated rules and crypto bans by different countries.

The causes were more extensive this time. These factors — macroeconomic worries, inflation, the possibility of a worldwide recession, and geopolitical unrest — are what have sparked the present bear market.

They are, in reality, the identical reasons leading stock markets to crash. That is crucial because we’ve seen a rise in the correlation between the cryptocurrency markets and traditional equities markets as well as a decrease in volatility as a result of the infusion of so much institutional capital.

The conflict in Ukraine, the sharp increase in global inflation, and the likelihood that central banks will continue to raise interest rates for several months are all exerting tremendous pressure on the financial markets. The anxiety of an impending global recession is on top of it all.

A more encouraging development is the general public’s growing acceptance of the cryptocurrency sector.

When a rebound occurs, the surge in interest in the metaverse and the demand for cryptocurrency-related goods and services could assist, perhaps resulting in an even more robust crypto economy once the winter is through.

The Crypto Winter Will Eventually Melt

Similar to the internet boom in the 1990s, many experts agree with this assessment and think that user acceptance of cryptocurrencies is still in its infancy.

Despite the dot com bubble, there was a huge increase in internet users at this time, which ultimately caused many businesses that couldn’t survive to fail. Since then, companies like Amazon, Netflix, eBay, and others have grown to be multi-billion-dollar brands with enduring significance.

Governments are currently working to create frameworks for the whole crypto ecosystem, extending this to the present crypto market. Self-regulation by established cryptocurrency companies is assisting in preventing hostile cyberattacks from shattering investor faith.

Conclusion

The state of cryptocurrency is comparable to that of the internet in the 1990s and Big Tech in the 2010s. Before becoming commonplace during those times, many technologies were invented by the younger generations.

Investors can easily benefit from attractive returns throughout the ensuing decades by spotting this pattern early on. It’s still possible to seize this chance, which is fortunate.