Crypto Winter is a expression that refers to a poorly performing cryptocurrency market.
- What is a Crypto Winter?
- Why Cryptocurrency is Crashing?
- What are Causes for Cryptocurrency Winter?
- What measures should be taken to tackle Cryptocurrency Winter?
- Does this Winter Affect all the Cryptocurrencies?
- When will the Winter end?
- Effect on Cryptocurrency Exchanges
- What should Cryptocurrency Investors do right now?
What is a Crypto Winter?
There are no widely accepted,specific guidelines for how far cryptocurrency prices must fall to be considered be cryptocurrency winter.
But market leaders and influencers tend to agree publicly when one has begun,as was the case in early 2022.
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November was a catastrophic month for crypto, even by its own standards . FTX one of the biggest and fastest crypto exchanges in the world ,rocked the crypto world to its core .
When it filed for bankruptcy on Nov.11th 2022.
Cryptocurrency Winter signifies negative sentiment and lower average asset values among a large swath of digital currencies.
Research shows that crypto winters have a major impact on investor mentality.
It’s sometimes easy to spot a crypto winter because the downturn may come with a double-digit percentage drop in crypto.
There have been several crypto winters in the past.
For example ,from late 2017 to December 2020, crypto prices fell and hovered far off from prior peak prices.
Why Cryptocurrency is Crashing?
FTX implosion seems to be have been only the beginning ,with BlockFi filing for bankruptcy few days back.
Other crypto entities ,including major lenders like Genesis Global Trading ,are trying to stay afloat and avoid their own bankruptcies.
The issue began two weeks ago when the Stablecoin Terra USD ,Luna’s sibling currency,lost its peg to the US dollar .
Luna is algorithmically linked to Terra USD. After the collapse of Terra USD ,Luna practically vanished. In just a few days.
Its worth plunged from $20 billion to nearly nothing.This resulted in trail of investor victims.
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Actually, they are all intertwined , because there is a lot of connectivity in the DeFi space. It’s not such a huge market but still one affects others.
We are just about a month out from this being the longest crypto bear market so far.
Like prior crypto winters ,todays bear market is marked by price drops of nearly 80% since the previous all time high.
But unlike prior winters, the economic circumstances surrounding the current market are much more fraught. Inflation is at historic highs, layoffs are increasing.
And a potential recession may be headed our way.
Moreover ,mounting scrutiny over FTX’s bankruptcy is turning regulators eyes toward crypto more than ever.
Cryptocurrency is a retail -driven asset class, so public trust is huge in this ecosystem.
“The trust factor is going to be huge as we bring these participants back into the marketplace.
Or into the marketplace for the first time.
What are Causes for Cryptocurrency Winter?
Cryptocurrency prices are unlikely to see major recovery without new or returning investors bringing cash back into the market.
But these recent bankruptcies are not the only reason crypto prices have fallen back down.
First was crypto’s crash during the summer when stablecoin terra USD collapsed in May. Bringing crypto token luna down with it.
There was a string of bankruptcies of large lenders and hedge funds, including Three Arrows Capital, Celsius and Voyager.
Economic bombshell after bombshell dropped this year,which have continuously worked to depress crypto prices.
These are all macroeconomic headwinds that have caused markets to dip 2023. All of these factors are just creating economic pressure ,where it is really difficult for crypto or any other risk asset to rebound.
Experts agree that economic pain points need to ease up in order for the crypto market to lift back up. From the perspective of your everyday investor ,its really hard to invest in something so shaky right now.
If Americans can’t pay for food,gas and are having trouble affording housing ,they are going to be less likely to put their money into speculative assets.
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What measures should be taken to tackle Cryptocurrency Winter?
1.Inflation should come down.
2. Federal Reserves need to ease up on interest rates ,so that US economy will flourish again.
3. Above measures will give investors bandwidth to invest in riskier assets and promote the next crypto bull run.
Does this Winter Affect all the Cryptocurrencies?
In this scenario the majority of cryptocurrencies are affected.
Though there is a possibility for exceptions ,investors should plan on a market -wide downturn during crypto winter periods.
Cryptocurrency Winters typically extend from well-known currencies like Bitcoin and Ethereum to non-fungible tokens (NFTs) .
And lesser known crypto coins and tokens
Crypto winters may coincide with other economic declines or a bear market in the stock market.
But that’s not always the case.
When will the Winter end?
No one can say for sure, but given the current economic trajectory and recent string of bankruptcies. Experts don’t think it will end anytime soon.
We will be here until at least mid-2023,. And it will probably take more time than that to come out of this bear market.
At the core ,you have what has seemed to become the natural cycles of crypto. It has large falls,it has winters,it has bull runs.
And its shown this cycle 3-4 times now. That’s fundamentally how this asset class seems to behave as its emerging.
People always joke that crypto has been announced dead a thousand times by the media .
And every time it comes back.
Effect on Cryptocurrency Exchanges
The actual use case of cryptos has been dwarfed by the massive infrastructure of speculation built upon it.
This is a natural correction going on now. As the use cases increase, cryptos will again be able to bear expanded speculation.
In terms of value cryptos are currently worth less than $1 trillion ,or one third of what they were worth seven months ago.
Crypto exchanges will eliminate approx. 1,100 positions or 18% of its employees. In addition, organisations such as BlockFi and Crypto.com apparently eliminated hundreds of positions.
Layoff are starting to happen in pure -play crypto companies like Coinbase,Gemini and BlockFi.
But larger institutional and investment groups like Fidelity are continuing to expand their crypto operations with a long term view that will go on for years.
Crypto exchanges have seen similar downsizing. Exchanges Crypto.com and BlockFi cut a combined 400 employees the month before Open Sea saw its layoffs.
At the same time, Gemini laid off 10% of its workforce during the same period.
What should Cryptocurrency Investors do right now?
Whether you are a current investor or looking to get started with crypto, now is a good time to do some homework.
If you don’t have a crypto wallet ,now may be a good time to consider getting one.
Cold wallets are usually the most secure option.as they hold your tokens on hardware that is not connected to the internet.
In contrast, hot wallets are accessible online which means they are more vulnerable to cyber attacks.
Experts recommend that you dedicate only 3-5% of our investing portfolio to crypto and to invest only what you are OK with losing.
It’s a fantastic time to take the time to invest in education and the space, to make sure you are comfortable.
And to decide what level of cryptocurrency investing is right for your financial situation.
And for your timeline. It’s a fantastic time to decide if Bitcoin is right for you… bitcoin is on sale.
Some investors are already using Bitcoin and other cryptocurrencies as a hedge against inflation.
This could prove to be a savvy move. But that remains to be seen for now because it is such a youthful investment asset class.
Its risk is less understood and more difficult to compare with other securities.
It will be hard for investors to decide which cryptocurrencies will survive or emerge strongly from this downturn.
Although some are viewing the crash as a chance to buy in at a lower price.
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How long does crypto winter last?
The average crypto winter lasts for 4 years.Which means crypto may not recover until 2026.
Crypto is still a new and relatively untested market which makes it much higher risk than stocks.
Will Crypto rise again?
2021 was a bullish year, while 2022 was a year of crypto winter.
This suggests that next 2023 will be a good year followed by an even better one.
Why is Crypto crashing?
While there are plenty of factors affecting crypto overall volatility ,the main source of this sudden crash is the downfall of FTX .
One of the most prominent crypto exchanges.
Is Shiba Inu a good Investment ?
Most analysts believe that Shiba Inu could rebound in 2023 alongside the rest of the cryptocurrency market.
If this happens ,most analysts expect Shiba Inu to trade at an average price of $0.00004 in 2023.
In the long term, analysts expect Shiba Inu to hit a high of $0.01 in 2025 if there is another major rally.
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