1 smart way to navigate the crypto winter

It has been a few years since last crypto winter. The last time cryptocurrencies became so bad was back in 2018.

At the end of 2017, the entire cryptocurrency asset class reached a record high market value of $ 780 billion. About the same time, Bitcoin (BTC 2.01%) put in a new all-time high price of just under $ 20,000.

When 2018 came, prices fell. For almost two years, the cryptocurrency economy traded sideways. A crypto winter came.

Now we are in a similar situation. In November last year alone, the collective market value of cryptocurrencies reached an all-time high of just $ 3 trillion. In the same month, Bitcoin reached an all-time high of almost $ 69,000. Since these highs, Bitcoin has fallen by about 75%. The cryptocurrency asset class as a whole has lost more than 50% of its market value. It’s hard not to feel that this is eerily similar to the record after 2017.

Although no one knows the duration or severity of this crypto winter, there are lessons that can help us navigate these times.

Altcoins will suffer the most

To say that investors have been spoiled by the recent beef market would be an understatement. Under the madness of Dogecoin (DOGE 0.84%), Shiba Inu (SHIB 0.87%), and in between, it seemed like anyone could throw money at an obscure altcoin and potentially make a lot of money. (To be precise, an altcoin is any cryptocurrency other than Bitcoin.)

This is no longer the case. When the cryptocurrencies come, the altcoins that provide huge gains are the ones that suffer the most. Last cryptocurrency winter, the market value of altcoin was destroyed.

After reaching an all-time market value of just under $ 552 billion, the value of all altcoins fell to just $ 41 billion. This together represented a fall of more than 90%. Conversely, while Bitcoin was not spared, it lost only around 75% of its market value.

Of course, some altcoins did not suffer as hard as others. But the general trend shows that Bitcoin provides isolation from poor market conditions.

Bitcoin is the safe haven

For a crypto winter to really end, Bitcoin must be in better shape. A good way to measure the health of Bitcoin is by looking at Bitcoin dominance.

Bitcoin dominance is a statistic represented as a percentage that shows how much of the entire market value of cryptocurrency is made up of Bitcoin. Because Bitcoin has the largest market value of the entire asset class for cryptocurrencies, it is a valuable indicator of the health of cryptocurrencies as a whole.

Before many of today’s popular altcoins were created, Bitcoin dominance never fell below 75%. This means that Bitcoin’s market value accounted for more than three quarters of the entire cryptocurrency economy.

At the bottom of the last crypto winter, Bitcoin dominance fell to as low as 34%. This shows that there was more money in altcoins.

After the massive sale in early 2018 that sent Bitcoin from $ 19,000 to $ 3,400 by March, the money slowly began to flow back to Bitcoin. As investors seemed to return to basics, Bitcoin’s dominance increased to almost 70%. Finally, Bitcoin rose from its lowest level in March 2018 to over $ 11,000 by mid-summer 2019.

The best crypto for the winter

At the moment, Bitcoin’s dominance is around 43%. If this cryptocurrency winter were to follow a similar upswing to the past, Bitcoin dominance must approach around 60%.

Patience is the key in these times. Instead of trying to allocate more money to speculative altcoins, take the safer path.

To ensure that you get through this crypto winter, make sure you are exposed to Bitcoin. If not, there is no guarantee that your favorite altcoin has what it takes to get to the next beef market.