It’s summer, but everyone is talking about winter. That’s because the crypto market is dropping like snow, with two leading snowflakes, bitcoin (BTC) and ether (ETH). For many people, it means nothing except financial loss and despair. However, some shifted their focus on buying the dip and looking forward to better times. We’re here to find out what crypto winter means for you, and what strategies you can use to minimize the harm.
Bitcoin has lost 55% since reaching the highest bar of $69,000 in November 2021. The collapse of Terra surely added some fuel to the bonfire. The second-largest DeFi ecosystem left retail, institutional, and corporate investors with over $60 billion in LUNA and UST loss.
To the top of that, the correlation between crypto and stock markets reached a historic high in 2022, that makes it the worst year for capital markets since WWII. The Russian-Ukraine conflict, the highest inflation in 40 years, and tough monetary policies made this bearish trend even more spicy.
Major cryptocurrency exchanges Coinbase and Gemini revealed hiring freezes and layoffs.
Past Crypto Winters
If you think it’s the first and the last crypto winter, you make a mistake.
The last took place from January 2018 to December 2020. The term firstly occurred in 2018 when Bitcoin lost more than half of its market cap, and other cryptos, such as Ethereum (ETH) and Litecoin (LTC), failed sharply following BTC.
Here’s the timeline of the 2018 crypto crash:
- 17 December 2017: bitcoin's price reached a new all-time high of $19,783.06.
- 22 December 2017: bitcoin dropped below $11,000, a fall of 45% from its highest.
- 12 January 2018: the price of bitcoin depreciated by 12 percent.
- 26 January 2018: Coincheck was hacked, so $530 million of the NEM were stolen by the hacker, and that was the largest loss ever by an incident of theft, which caused Coincheck to indefinitely suspend trading.
- 7 March 2018: stolen Binance API keys were used to make irregular trades.
- Late March 2018: Facebook, Google, and Twitter forbidden advertisements for initial coin offerings (ICO) and token sales.
- 15 November 2018: bitcoin's market cap dropped below $100 billion for the first time since October 2017, and the bitcoin's price crashed to $5,500.
However, if talking about the current situation, investment in the crypto-sphere remains steady despite of the crypto ‘ice age’ 3 years ago. For example, in January FTX crypto-exchange announced the launch of a $2 billion venture fund to aim Web3 opportunities. Companies are looking into the future with crypto, so the U.S. Patent and Trademark Office show that Walmart Inc. is about to launch its own cryptocurrency and NFTs (non-fungible tokens). GameStop Corp. is also planning to introduce an NFT marketplace for gamers by the end of the year.
What Does Crypto Winter Stand For?
Let’s begin with the concept. The phrase “crypto winter” probably, came from the “Game of Thrones.” TV-series. In the show “Winter Is Coming.” was the House of Stark’s motto. It described that the lasting conflict could come to the Westeros’ land at any time.
In the same way, an extended period of failure may be settling over the crypto market. So, it’s better to be prepared to chaos and try to gain from it.
To put it even simpler, crypto winter happens when prices shrink and remain low for an extended period that could last for year.
Analysts believe the current crypto market was effected by huge world events, especially the Russia-Ukraine conflict.
Since November 2021, the crypto market has touched the bottom by falling 60%—severely dropping from $3 trillion to less than $1 trillion.
Positive Sides of Crypto Winter
Do you remember that the darkest hour is just before the dawn? Sound truistic and too good to be true, but that’s the only option to survive in a harsh world of finance. Even such dramatic financial bouncing has its advantages, and here they are.
The previous experience proves that crypto winter reminds a conventional bear market, and the results aren’t that different from bear markets in other asset classes. Long-term, crypto winters swipe out young and weak startups and make the top companies way stronger and thus, prove their products quality. Survival of the fittest, right?
Better to look the other way, as there will be only the proven players on the market, while all the rest will be thinking of how to improve and protect themselves to return to the market.
For those who’re about to build something solid and worthwhile, it could be rather a field to grow and develop – especially because, unlike in 2018, there will still be considerable venture capital available. A nice example is OpenSea, which gained $20 billion in NFT sales in 2021, and was founded in 2017, with a lot of improvements and work through 2018 and 2019. Remember, that was during tough times for crypto, but also, it was before most people had heard the term non-fungible token.
The OpenSea is just an example of what can happen. There will be more cases like that, as it’s almost impossible to imagine the absence of crypto and new projects.
Right after the crypto winter ended in late 2020, there was a period of significant growth that lasted for most of 2021. That’s quite crucial to keep in mind while the market is nuts.
If you let us give a kind of advice (nonfinancial one, for sure), but rather a motivating one. In the present situation, be the musician of the RMS Titanic if it’s possible with all their courage and strength, and plan a brighter future instead of panicking and sinking into depression. Instead of that, monitor the market, and look at promising currencies and projects, bearing in mind that investing was, at all times, a dangerous adventure for those who are dear to dice with death.