Since the beginning of the year, the 2022 crypto market has been undergoing several downward trends. Almost all the cryptocurrencies have experienced an immense downfall in their value during this period. However, all the digital assets had different factors for their price movements and thus this situation can be compared with the time period between 2018 and 2020 which is referred to as “crypto winter” in market terms.
What is Crypto Winter?
The cryptosphere has undergone immense price corrections in the past. As a result, the negative phenomenon of the bear market starts controlling the crypto market. A market is considered to be bear when the prices of digital assets fall around or below 30% of their normal prices. This negative market condition is termed “crypto winter”. This phrase was inspired by the HBO series, Game of Thrones which indicates the onset of trouble and immense volatility in the market. Between the years 2018-2020, Bitcoin lost nearly 50% of its market value but came up stronger yet again in November 2021 with the all-time highest value. Thus, Crypto winter is just a period similar to the conventional bear market but with some more elaborated events.
What is considered as the Onset of 2022 Crypto Winter?
The different events in the crypto winter are attributed to and fueled by distinct factors. The year 2022 began with several macroeconomic factors such as US Federal Reserve hiking the interest rates that largely affected the crypto market to the greatest extent. Furthermore, the de-pegging of TerraUSD Stablecoin in mid-May put the complete crypto market in a downward spiral after which it could not fully recover itself. Infact it fell to its lowest in the mid-June when Celsius scandal was already hitting US$18,000, the weakest value since December 2020. With the multiple events pulling the value of BTC and other cryptocurrencies down indicates the beginning of crypto winter.
Are Crypto Winter and Bear Market the Same Thing?
With respect to the performance of the assets and the nature of the market, both crypto winter and bear market are the same things. However, the term crypto winter is only used to talk about digital assets i.e. cryptocurrency, and does not encompass stocks, mutual funds, or other traditional investment formats. While the bear market is a general term that includes stocks, cryptos, equities, and digital assets too. Thus, in a bear market, all investors plan for the market-wide downturn whereas to survive the state of crypto winter only crypto investors prepare themselves.
Does Crypto Winter have any Advantage?
It might seem that the downfall trend in the market is always a sign of negativity and weak performance of the assets. However, there is an unseen side to it that is usually ignored and underestimated. These downtrend phases such as bear market or crypto winter are the most suitable period for price discovery and correction. During the crypto winter, the market is able to filter out the weak projects and bring the most innovative projects to the limelight. As a result, in this period only the most powerful cryptos are able to survive the revival phase of winter. Alongside, it is a great time for crypto investors to plan a portfolio of more cryptocurrencies with basement-level prices as during this time most of the cryptocurrencies are available at a bargain.
How to Survive in the Crypto Market during this Period?
Amidst the period of prolonged price volatility dips are quite a normal part of investing. Therefore, the investors or every person associated with the market should follow some tips to navigate the facts relating to the cryptocurrency. Since this phase in the crypto market is quite fast, therefore it is possible that investors may end up making panic sell. Thus, the investors shall try to stay strong and patient with the uncontrollable market changes. Furthermore, investing the funds that you can’t afford to lose shall be avoided unless the past performance of the assets is closely scrutinized.
During the time of Crypto Winters, crypto investors need to understand the volatile nature of the cryptocurrency and act smart. However, this phase shall not be underestimated and positive signs shall be closely observed. Thus, smart action taken during this phase is a secret to long-term survival in the market.