Just like the stock market, the cryptocurrency market also goes through a cycle where it can go on a downward spiral. From technicals to turnovers and market indicators flashing red, is cryptocurrency suffering a decline? Whether you are a newbie in the industry or not, you may or may not have heard of ‘crypto winter’. Read on to know what it is and what about it that got many crypto enthusiasts so worried.
Understanding Crypto Winter
If you spend a long time browsing the internet and researching cryptocurrency news, you’ve probably gotten the memo or have read signs that the markets are suffering and crypto is getting hit spot-on. Over the last months, crypto winter is all over the crypto-verse due to the $1.2 trillion shed by the global crypto market in the last three months. This resulted in investors pulling out, with the fear of losing their funds due to the situation.
Crypto Winter is a term used for a period where asset prices persistently fall over many months and without any recovery in sight for over a year. There are crypto experts who believe that the recent declines hint at the arrival of winter for cryptos, but some believed it could be much worse and that crypto is heading for an “ice age,” where asset values stay low for a couple of years.
Due to the various happenings in the crypto market, it’s entirely important to secure your assets because the happenings in the crypto market are very unpredictable. Some investors engage in platforms such as Bitcoin Era to connect to reliable brokers in the market that can guide them in navigating the market wisely and come up with an effective approach when facing these unplanned events.
In June 2021, the values of the five famous cryptocurrencies dropped within just a week, This resulted in speculations of many traders about the possibility of a crypto winter 2021, which was unexpected. Before the fall happened, Bitcoin still top the chart with the largest market cap, but within a week, it dropped by around 7.5%, followed by Ethereum falling by 14.5% during the same period.
Are We In The Middle Of Crypto Winter?
The cryptocurrency market has experienced ups and downs over the last years, and while things are quite different now, rumors circulating about another winter could happen haven’t stopped. But how can anyone know for a certain? Check out these 3 indicators to watch out for.
1. Crypto Market’s Behavior
Since the cryptocurrency market has only experienced one crypto winter in its history, this can be used to discern whether another winter is coming or not – by drawing comparisons between the market back then and now. The crypto winter of 2018 made chaos in the market immediately after bitcoin reached its all-time high in December 2017 of $19,850 and its price tanked 70% over the next 51 days.
In 2022, it has been 75 days since Bitcoin fell from its new all-time high of $68,990 and has so far dropped to a maximum of 52%, and has not shown obvious signs of recovery. By comparison, the current crypto market cap has decreased 48% over the last 75 days. However, this is a rough estimation for deciding where the current market stacks up against itself and should not be the sole base for confirming or denying that a new cycle hash started.
2. The Four-Year Crypto Cycle
There’s a belief that the crypto market follows a pattern of rising and falling in price every four years. This four-year gap between two peaks has reasonably caused some investors to fear the same gap rings true for crypto winters. Since the first crypto winter happened in 2018, experts imply this year could be the second winter, assuming cycles will continue to follow the same four-year pattern. But then again, it’s essential to balance this with the maturity of the market back then vs now, as well as other factors.
3. Macroeconomic Factors
There’s no denying that many have changed since 2018, not just the cryptocurrency but the global economy in general. Financial markets worldwide have been shaken by the first global pandemic crisis and have reached inflation levels many countries have not seen in decades. With that, the cases of cryptocurrencies’ downfall may be due to the frivolous investing from retail and institutional crypto investors as borrowing money becomes more expensive while the cost of living increases.
So to answer the question if we are in a crypto winter, crypto experts believe it’s difficult to say for now. This is because of the various factors and changes that happened in 2018 versus now. Most especially the global economy that suffered crashes due to the events in the last years. Experts also recommend taking more time to observe as the crypto market situation lies between a crypto crash and crypto winters. They also believe that while it’s not yet proven that we are in a crypto winter, it would be the best time for cryptocurrency to improve its technology until the next winter happens.