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If you get that feeling that the world of cryptocurrencies is slowly fading away and doesn’t seem to be picking up, you’re not alone. It is the icy cold of another crypto winter. Since the beginning of last year, the value of the cryptocurrencies it has plummeted into trillions of dollars.
And it is that, we have lived through a rather turbulent 2022 in terms of cryptocurrencies with great losses, a price of Bitcoin that it does not recover and that it does not even reach 16,000 euros and several crypto buying and selling platforms such as FTX or BlockFi have gone bankrupt.
The expression cryptowinter probably comes from the well-known Game of Thrones series. In the series, House Stark’s motto was “Winter Is Coming”. It was seen as a warning that a complicated and long-lasting conflict could come to their lands at any time.
The situation is difficult, but this is no time to panic. The global cryptocurrency market has been through this before and it is likely to happen again now that we have entered 2023. So bundle up and turn up the heat a bit, if your finances allow (because that’s a separate issue) because the crypto winter is upon us.
What is crypto winter?
In the same way that before we made a simile with Game of Thrones, a long period of industry troubles may be settling on the cryptocurrency market. During this difficult time, you must remain on the lookout, watchful, and be prepared for chaos to take over the market without much warning.
Similar to a bear market in traditional securities, a crypto winter is when the worth either digital asset prices fall and remain below their highs most recent for an extended period.
From a technical point of view, bear markets require a 20% price retracement from peak to trough, but crypto winters do not have such a specific metric.
Some specialists detail that high inflation has driven the increase in interest rates in the United States, which is the largest player in crypto. When TerraUSD and Luna crashed in May and set off a ripple effect in the cryptocurrency world, the crypto winter had already begun.
The big basic problem is that, being a relatively young market, there is no super-long historical record to examine to help predict when this particular crypto winter will end. But thanks to the magic of hindsight, we can certainly pinpoint when it started.
When did the last crypto winter start?
The prices Most cryptocurrencies are volatile, that’s something we already know, so true crypto winters are hard to tell until well advanced. We can safely say that the last crypto winter began sometime between late 2021 and mid-2022.
It’s true that little by little there seems to be a price correction, but when prices plunged and stayed very low well into the spring, and plummeted further in early summer, most observers agreed that Indeed, we were immersed in another crypto winter.
The big economic consequences of the crypto winter
Since the beginning of last year the people and companies behind cryptocurrencies have been facing great difficulties. Many crypto and blockchain companies have seen deep losses and witnessed significant layoffs. On August 19, cryptocurrency lender Hodlnaut announced that he had laid off 80% of his staff.
To all this we must add the already mentioned major collapses of FTX and BlockFi. The main NFT marketplace, OpenSea, reduced its workforce by 20% in July. This came after trading on its platform fell 99% from an all-time high in May.
Publicly traded companies have not been spared either. The world’s only publicly traded cryptocurrency exchange, Coinbase, laid off roughly 18% of its workforce in June (and another 20% in January of this year), while its share price has fallen 75% in 2022.
All is not lost and it even has some advantages
This all sounds really catastrophic, but don’t panic either. The last crypto winter lasted from January 2018 to December 2020. The term was probably first used in 2018, when Bitcoin lost more than half of its market capitalization, and other cryptocurrencies, such as Ethereum, fell sharply.
We know from that experience that the crypto winter looks a lot like a conventional bear market, and the results are not too different from bear markets in other asset classes. In the long run, crypto winters kill off startups and they offer an opportunity for the best ones to mature and test their products.
Once the crypto winter thawed out at the end of 2020, a period of incredible growth lasted for most of 2021, though another bearish period followed.
Tips to survive the crypto winter if you are an investor
Whether we are talking about stocks or cryptocurrencies, investing can be a roller coaster. This year has been a difficult one for investors across almost all asset classes, so It can be difficult to overcome a period as complicated as 2022.
One of the great pieces of advice from investors is that, as we have already pointed out, the cryptocurrency market has gone from lows to highs and vice versa. And in the intervening years, new technologies and ecosystems have continued to flourish in this space, a good sign to say that they always end up surviving.
On the other hand, a certainty of crypto winter is low prices, and if you have any idea of the investing world, you’ve no doubt heard the rallying cry of “buy on the drop”. Whether or not you do is completely up to you, but if you’re buying the dip, don’t do it with money you don’t have.
One of the great tips to keep in mind is to always stay informed. Keeping abreast of the latest news, both in the cryptocurrency and traditional markets, is important in order to stay abreast of new developments in the industry.
Finally, an important step is make sure you keep your funds in a safe place. Whether it is a physical wallet or a decentralized solution, you need to make sure that you own your keys.
With many exchanges suffering the consequences of the crypto winter, bankruptcy and late payments have become more and more frequent. Make sure that where you invest is safe and reliable.
When predicting the future of the cryptocurrency marketmost experts say that the strongest cryptocurrencies will prevail. However, some investors love the pullback as they see it as a time to bet on the market for the long term. They are betting on a resurgence of cryptocurrencies once the global political and economic crisis subsides.
For example, despite all the negative press surrounding cryptocurrencies, big investors take it to their advantage and start investing millions of euros or dollars in new businesses.
However, and with all this, the market is not expected to recover until 2024. And it is that, things are still very recent regarding episodes such as the collapse of FTX and it will be a long time until the waters calm down. Knowing this, 2023 is going to be a most decisive year for the world of cryptocurrencies.
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