By Nathan Ferguson
Do you ever have heard about a Crypto Winter? If you are a crypto lover, this term will not be new to you. The situation could be the opposite, like first, you have faced it and then know about it through your research. However, what would be the situation? It is crucial that every crypto user must know the Crypto Winter. Let’s see it a bit in detail.
What is a crypto winter?
The winter is associated with less activity in everyday life. Similarly, crypto winter is used to express the poor performance of the crypto markets. For a better understanding, it can be related to a bear market situation in the stock market. During a crypto winter, a great negative sentiment and lesser average asset values are observed in a large band of cryptocurrencies.
A looking into the price history of cryptocurrencies, one can easily find the crypto winter due to a more significant decrease in cryptocurrency values. Research has proved that crypto winter has a significant impact on investor temperament.
Let’s understand a crypto winter
If we make it simple, it is easy to understand that the period when cryptocurrency prices fell considerably is named crypto winter because, like winter, it reduces the market activity. The wise investors become reluctant to invest and start waiting for spring when new leaves and branches (options) sprout.
Since its emergence, the crypto market has experienced many crypto winters. One of the most recent events was a fall in prices in late 2017, which continued until December 2020. It was not a minimal decrease, but the price fell far from the highest in 2017. The currency market involves the volatility element, and the cryptocurrency market is highly volatile and challenging to predict.
In December 2020, the prices burst out and reached new peaks; it was a record growth in a remarkable crypto bull market. At the beginning of 2022, there is another fall in price, and leading traders and influencers have accepted it as the start of crypto winter.
There aren’t specific guidelines and rules to define the degree of decline in prices for indication of a crypto winter because the cryptocurrency market is highly volatile in nature. However, when it begins, a significant number of traders and crypto leaders accept it publicly. No one can exactly predict a crypto winter because of its volatile nature. But everyone, especially crypto investors, should know that crypto winter is a reality and can happen anytime.
Crypto Winter Apprehensions
Although the conventional stock market has presented a design of ebbs and flows, it isn’t easy to find any such pattern for cryptocurrency because of its comparatively short history, which is only a decade. There is a possibility of a never-ending crypto winter because of its brief history; we’ve no idea about the length of crypto winter. In the case of long-run crypto winter, it is alarming for crypto investors that a continuous decrease in value can lead their assets to zero, which could be the worst case.
The lack of regulations regarding crypto markets and exchanges is another factor that increases the risk. They work under minimal laws, and little scrutiny enhances the risk factor and provides the loopholes for fraud and scams. It is a considerable risk for long-term investors or those who buy and hold crypto for a long time.
Difference between Bear Market & Crypto Winter
The bear market is a term used in the stock market and is now used in cryptocurrency. In the stock market, when stocks experience a lower value due to a mix of economic elements, the situation refers to a bear market. A bear market and a crypto winter can be coincided but are not associated with each other. The stock market has a well-settled setup and rules that are active in determining the stock prices. On the other hand, cryptocurrency is still in its infancy, and there are no well-developed valuation models.
The valuation factors and models significantly differ between a crypto winter and a bear market. However, the recent crypto winter that started in 2021 has revealed that a crypto winter and a bear stock market can succeed concurrently. So, although both are different but also have similarities. Cryptocurrency also follows most of the rules, models, and terminologies of the stock market but sometimes in different scenarios. Both are related to monetary affairs and are linked in many ways.
Effect of Crypto Winter and Cryptocurrencies
When talking about crypto winter, there is a fundamental question, is it specified for a single cryptocurrency, or does it affect all? Simply we can say it doesn’t affect all, but most cryptocurrencies become affected during a crypto winter. It doesn’t mean that investors should go careless. They should design a strategy by considering the entire market downturn when the market observes a crypto winter. Don’t go further in the hope of exceptions.
In What Way a Crypto Winter Can Be Prophesied?
Can anyone predict a crypto winter? When it’ll happen, and how long it’ll continue? Modestly, it isn’t possible to forecast starting and ending of crypto winter. Due to high volatility of the cryptocurrency market no one can predict it accurately. However, keen and wise monitoring of the crypto market, news, social media platforms, and cryptocurrency communities can help in understanding the course of the event that can indicate a crypto winter. You can find good crypto market insights on Reddit, Discord, and Twitter and plan a successful investment.
Cryptocurrencies Worth
Due to the virtual nature of cryptocurrencies, there are many questions about their value. The conventional currencies are evaluated based on gold. There are many arguments about cryptocurrency value. Some doubting Thomas says that crypto doesn’t have core value, and there are chances to reach zero gradually. At the same time, crypto lovers are enthusiastically hopeful about its value and expect market growth to become a vital part of the global community.
It is challenging to decide which camp is correct and to what extent. Cryptocurrency is a comparetively new class of assets securing a significant position in the global economy. Ambiguity about its value is primarily due to the lack of regulations and its infancy. However, the investors and buyers are more likely to determine the exact value of crypto assets.
Get Crypto Knowledge to Win Crypto Market
As cryptocurrency is a new member of financial systems and passing through its infancy, it is the lovely child of the world that interrupts every walk of life. People and organizations are accepting it as a fast medium of secure transactions and payments. It requires you to learn more and more about cryptocurrency and its mode of action. Numerous platforms offer courses to clarify your concepts and provide fundamental and advanced knowledge. Remember, knowledge is power, and you can rule the power of cryptocurrency with it.
How to deal with the horror of crypto winter?
Crypto winter is often considered a horrible situation that bows you down on your knees financially. But it is not an accurate picture. Many people make money in cryptocurrency when others are facing a fear of losing everything. They find opportunity in every situation due to their always positive attitude. Actually, a crypto winter is not so horrible as it is predicted or described.
Do you know what happens between two peaks of cryptocurrency? Precisely that is called crypto winter. It is the time when prices of cryptocurrencies fall, and no one can tell how long it will continue. But after every crypto winter, there is a crypto spring. I mean to say that the market starts to grow, and prices begin to shoot up towards new peaks.
For example, the last crypto winter was observed in late 2017 that was ended in late 2020 and affected the market for 2 to 3 years, but after that, there was a massive increase in prices in December 2020, which was a beginning of a journey toward new highs.
In my opinion, crypto winter is not such a horrible situation. Your positive attitude can find many opportunities. Things can be worse and more boring than a crypto winter. The main point is to remain positive and see the chances from the negativity. Let’s look into some imperative things we can do during a crypto winter to make our time profitable and bring a better future.
Collect More Coins
Collecting crypto coins when prices are high is never a favorable option. It’s not wise to buy coins when prices are roaring high. When BTC and other crypto coins are expensive and everyone is shouting about new price targets, FOMO seems ridiculous.
However, the crypto winter is the best time to collect more coins using the DCA strategy when the market is calm, and crypto prices rest at peace. It is one of the best strategies to achieve your goal of collecting more coins using fewer funds.
The crypto winter is the best time to implement it. As a result, you enhance the number of crypto coins in your possession instead of the value. It works the best because when the value of your bought coin increases after crypto winter, you collect a handsome profit. So, don’t get afraid of crypto winter; instead, make it your friend and increase your number of coins.
Explore New Best Things
Do not stick to only cryptocurrency. There are numerous things to explore and reveal. The crypto winter is the best time to use your skills and energy to uncover new opportunities and benefit from them. The DeFi activities are an excellent alternate. With the lowering of crypto prices, blockchain doesn’t disappear or stop working, and it remains functional and serves in the DeFi systems. Polygon, ETH EIP 1559, and BNB with Binance smart chain are good options.
The bear market is an excellent time for us to sit back, reflect, and make some fair-minded reasonable level of effort. The positively trending market, as great as how it feels, frequently diverts. Individuals usually suffocated in the rapture, which also happened to me.
Simultaneously, the bear market additionally gives us an adequate opportunity to reexamine our portfolio. Can we just be honest? There should be a few coins and tokens we purchased out of unadulterated theory, and a crypto winter can be a chance to remove a few names that are not valuable.
Active Involvement in DeFi (Decentralized Finance)
Many individuals are griping about the rising gas charge during the pinnacle of a positively trending market. That won’t be the issue during a crypto winter. For my purposes, it converts into something particular: I could participate in DeFi projects without being deterred by excessive gas charges.
Taking part in DeFi is my approach to advancing by doing. Whether it’s marking, wrapping BTC, or loaning my coins to a liquidity pool, these are a couple of exercises that give you an understanding of how DeFi functions. During a bear market, I will likewise possess energy for different undertakings that require more responsibilities, like learning Solidity (ETH programming language) or running a little mining rig.
Range Trading
You could relate crypto winter as a long exhausting period with low exchange volume, which can be pretty discouraging for merchants. Brokers love the unpredictability, and I concede I really want my portion of exchanging dopamine, too, at times. For this situation, the possibility of crypto winter is a long way from engaging for me.
In any case, I recall that I lived it up exchanging 2019 and mid-2020. It demonstrates that in any event, during a bear market, some degree of unpredictability exists, yet not as euphoric. I can exchange when I feel like it — yet have some good times. You can capitalize on the sideways market by playing the reach. It’s essential to note that this directly applies to individuals more knowledgeable about the market.
DeFi Staking
Marking is a movement wherein you secure your coins in a DeFi task, and you will procure some interest. It’s one of the ways of getting recurring, automated revenue out of your current and unused coins.
Marking is brilliant for individuals who need to get past crypto winter without a hitch, winding up with more cryptos toward its finish. It’s one of the ways of developing your portfolio, separated from just purchasing more. Marking has less gambling, and you don’t need to manage ephemeral misfortune. Likewise, an incredible option for individuals would rather not exchange.
I’ll refresh this article when I track down what should be done to remember for this rundown. I accept there are more open doors concealed underneath the supposed ice of crypto winter.
There’s something final that I haven’t yet included because it’s more private. For my purposes, I plan to continue sharing and expounding on crypto, particularly here at this stage, and I intend to do it consistently regardless of the cost of Bitcoin. Think about following me, assuming that you are keen on future updates.
Advantages of Crypto Winter
Crypto winter is not new to the market; it has also hit it earlier.
In the year 2018, the market experienced a crypto winter that endured till December 2020. In 2018 when Bitcoin experienced a reduction in its market cap by almost 50%, the term crypto winter was used for the first time. It also involved other cryptocurrencies like LTC and ETH and let them drop significantly.
By observing the crypto winter, we can conclude that it is like a stock market with a bearish trend, and so are its outcomes. Long haul, crypto winters eliminate youthful new businesses and present a chance for top organizations to develop and demonstrate their items. According to Jake Weiner, the organizer, and CEO at Uncommon, there are plenty of new companies all through the business over the last year, and many of them will fizzle. He noticed that as it gets harder to go after investor cash, other crypto organizations will cut financial plans. Tragically, some will be compelled to reduce staff.
“Assuming the market stays in compression for a considerable length of time, unfortunate organizations will endure — as well as a few extraordinary ones,” Weiner says. “The uplifting news for those organizations is that not normal for past crypto winters, a ton of crypto have previously amassed reserves that they will keep on sending.” On the defrosting of crypto winter at the end of 2020, a time of unbelievable development went on for the more significant part of 2021.
Final Thought
Crypto winter is mainly considered a horrible time for worldwide crypto lovers. Initially, it was a nightmare, but research and development have lightened it. Now it is not only a threat but also opening opportunities for optimistic traders and investors. One should observe the market keenly to get an idea about the start of a crypto winter and design new strategies to get more benefit from this time. A positive attitude and an optimistic approach are always a winning combination. The cryptocurrency volatility is also a stimulus to make the best of it.