Crypto Winter 2022: Everything you need to know

By Edul Patel

The crypto market has undergone a downward trend with a sharp decline in prices since the beginning of this year. Although all corrections are different and are caused by different factors, the current situation can be compared with the period between 2018 and 2020, which is often referred to as the ‘crypto winter’ in the market.

What is crypto winter?

Cryptocurrencies have undergone many price adjustments so far in history. There have been many cycles where bears have shown their control over the market. In general, a bear market is associated with the period when prices fall around 30% from all-time highs. Most cryptocurrencies have fallen more than that since the beginning of this year. This market with poor results is called a crypto winter that indicates the negative sentiment across the digital currencies. The term “crypto winter” came into use from the HBO series, Game of Thrones. The period warns of problems with settling over the crypto market.

This can be quite challenging for hodlers as they see a lot of volatility in the market. However, this is not the first time the market has witnessed such a period of correction. As discussed above, between 2018-2020, Bitcoin lost almost half of its market value, but came back stronger in November 2021, reaching its all-time high. Crypto winter is just a period like a conventional bear market, but to an elaborate degree.

However, in the words of the renowned poet, PBShelley, “If winter comes, can spring be far behind?”

When does the crypto winter start?

Long periods of crypto winters are usually driven by a bunch of different factors. The year 2022 has started with many macroeconomic factors, such as the Federal Reserve raising interest rates and affecting the crypto market to a large extent.

In addition, the de-pegging of TerraUSD stablecoin in mid-May has taken the market into a downward spiral from which it has still not recovered. Although BTC has been on a consolidation since early April, it began to fall in mid-May due to the de-pegging of TerraUSD stablecoin. It fell to its lowest point in June in the midst of the Celsius scandal, which reached the US $ 18,000 level, which is the weakest since December 2020. With a series of events that pulled the BTC price down, the market has taken this as a sign of the start of crypto winter.

What is the benefit of this period?

During a bull market, all random projects and cryptocurrencies appear to be in a rocket ship to the moon. All bear markets are usually the most appropriate periods for price discovery and correction. Crypto Winters filters out the weak projects that push the most innovative to grow and validate their products. The cryptos that can survive this particular period may appear outside their positions after the winter resuscitation phase.

What should investors do?

Cryptocurrency is a great time for investors looking for an opportunity to buy more cryptocurrencies for basement-level pricing. But before making a specific decision to invest, it is important to research and analyze well and then make decisions. During a bear market, everything seems to be available at a bargain. It can be tempting to invest in random coins in hopes of exponential returns. However, it is a fairly novice decision.

Is crypto winter the same as a bear market?

A bear market is a term used to describe a market with poor performance; it can be stocks, cryptocurrencies or even stocks. However, cryptocurrencies are users referring to the crypto market where the cryptocurrencies are lower than usual. Most cryptocurrencies are affected in this phase. So investors need to plan for a market-wide downturn during the crypto winters.

How to survive in the crypto market during this period?

One thing to keep in mind during this period of prolonged price volatility is to remember that falls are a normal part of investing. Here are some tips to help you navigate these times.

• Do not invest money you can not afford to lose
• Start planning how to survive in the bear market either through DCA or Dollar Cost Averaging.
• It is important to stay strong and avoid panic selling.
• Bear markets are usually fast and furious.

Conclusion

Crypto winters can make you feel low, but remember that bear markets are also followed by beef markets. In the stock market, history shows that prices have always picked up again. Although cryptocurrencies can be very volatile, this sector has always returned. And came back strongly. This is why research is very important before investment decisions are made. As a long-term investor, following SIP or DCA can help you achieve better risk-adjusted returns in these times.

(The author is the CEO and co-founder of the crypto investment platform Mudrex. The above views are those of the author and not necessarily financialexpress.com)

(Cryptos and other virtual digital assets are unregulated in India. They are considered extremely risky for investment. Consult your financial advisor before making an investment decision)