Has the Crypto Winter Arrived?
If you have been part of the crypto scene, you must be aware of the downfall that the crypto market has been experiencing since the start of 2022. This has led many to believe that a “crypto winter” is upon us. A crypto winter, in simple terms, refers to a time in the crypto market when prices start to fall significantly and then remain low for multiple weeks or months without proper signs of improving.
Many major events within and without the industry have together contributed to the freefall in the crypto market. One such event was the failure of the TerraUSD crypto project in May, which was followed by the cryptocurrency lending platforms Celsius Network and later, Voyager freezing withdrawals, and Leading lending firms like the 3AC’s insolvency rumors sparked a sell-off that pushed Bitcoin to a 17-month low. Despite all of this, the question remains. ‘Is the crypto winter really here or not?’
The Current Market Status
The crypto market is known to be unpredictable and extremely volatile and has witnessed its periods of bust and boom. But the market performance in the past few months following the November 2021 peak has heavily impacted investor confidence and cryptocurrency’s prospects on the regulatory front all around the globe. While the market is still nascent and trying to find a universal ground for the regulatory framework, the death spiral post the Terra-UST crash has exposed many not-so-good projects and rendered some good ones susceptible. The market, as such, is in a prolonged bear market phase and shows no particular signs of revival.
The problem started in early May when Luna’s sister currency, the stablecoin TerraUSD, lost its peg to the US dollar. After TerraUSD’s demise, Luna, Terra’s native token, was all but gone. Its value dropped from $20 billion to almost nothing in a few days. This left a trail of victims in its wake who are suffering from some major losses with no scope for things getting better.
Not only this, but major names in the market have been suffering big time. This has largely affected the overall downfall of the market. Job cuts have been reported by prominent crypto exchange platforms such as Coinbase and Gemini. Coinbase has had to lay off 18 percent of its workers, while Gemini executives have warned its employees of difficult times ahead.
Voyager Digital, a crypto lender and another prominent name in the crypto industry, declared Chapter 11 bankruptcy recently. In recent weeks, several prominent crypto businesses, and lenders, in particular, have encountered solvency concerns that have prevented clients from withdrawing their money from the firm’s platforms.
In mid-June, Celsius announced that it would halt withdrawals. CoinLoan, CoinFLEX, and Voyager also had similar announcements waiting for the public with withdrawal limitations and declarations of outright halts.
Dropping from $2.2 trillion at the start of 2022, the current global market capitalization is now at $944.05 billion. Bitcoin (BTC) and Ethereum (ETH) are just trying to stay above their crucial support levels at $19,740 and $1,076, respectively. Cryptocurrencies, generally, are worth one-third less than seven months ago, or less than $1 trillion, in terms of value.
Is Crypto Winter Here?
If we were to analyze whatever has happened in the past few months, it is safe to assume that the dreaded ‘crypto winter’ is truly upon us. The major dips in the market and major platforms within the crypto market have been actively suffering from issues like bankruptcy and having laid off their employees to reduce the workforce to keep the business afloat. Let us now look at what might have caused it and how it differs from the winter of 2018.
We have experienced over eight crypto winters thus far, and each has had distinctive characteristics and certain commonalities. The latest crypto winter before 2022 started around 2017 and continued until 2018. After reaching a peak of $19,000 in 2017, the market cap fell by more than 86 percent to $3,200.
2018 vs. 2022: a comparison between the previous crypto winter and the latest
Following the initial coin offering (ICO) excitement, which saw several fraudulent schemes defraud investors, the market crashed in 2018. The number of active wallets then fell from 1.2 million to 402,000. Despite the reduction, crypto addresses have remained constant in 2022 at roughly 1 million. Retail and institutional traders continue to show confidence and long-term optimism in the market.
In the winter of 2018, bitcoin lost 80% of its value. It did, however, bounce back and soar to incredible new heights. But this time, cryptocurrencies’ market credibility is in jeopardy as there are no signs of a resurgence so far.
Now, if we talk specifically about BTC, it fell by approximately 81 % in 2018, while the 2022 bear market has caused it to fall by 75%. BTC has been trading below its 200-day moving average throughout 2022, as it did in 2018. And BTC has long failed to break above its 200-week moving average (WMA). The 200-WMA can be taken into consideration as a sign of the average value of previous prices and might be broken at some point, as it had done the last three times when BTC had dropped below it. So far, Bitcoin has managed to overcome even sizable drops and rise to fresh highs.
Tips and Tricks to Survive a Crypto Winter
- Save for better times: Instead of investing all your money during this crypto winter, saving up can be a better option, especially if you are a beginner in the market. You as an investor should also be aware of discounted sell-offs, as short-term market recoveries can be termed as the calm before the actual storm and end up causing you more loss than any profit.
- Do Your Own Research (DYOR): This is the most important aspect you need to look over while investing your time and money in the crypto industry, regardless of the current crypto winter, but of course, now is the time to be extremely careful. It would be best to analyze everything, from the coin you invest to your strategies.
- Don’t invest more than what you can afford to lose: There is no need for a reminder of just how unpredictable the crypto market can be, and because of this, there are always high chances of facing an unprecedented loss. As a result, you should only invest what you can afford to lose. Like with any other investment, you should only utilize your disposable income and have the patience to go through numerous stages before investing.’
Future of the Crypto Market
How long will this crypto winter go, or is there any way of getting out of it? Well, nobody can truly predict that. Despite that, people continue to invest their money in the crypto industry and blockchain technology, and fresh new crypto projects are still coming into existence every other day. What we do know for sure is that cryptocurrencies are here to stay.