Crypto Winter 2022: When does cryptocurrency end?
The crypto market peaked at close to $ 3 trillion in November last year, and then reversed sharply as economic uncertainty led many investors to unload risky assets. That spark became a fire in dry grass when the first losses forced the liquidation of heavily leveraged crypto positions (investments financed with debt), which led to even greater losses.
Unfortunately, risky games were not limited to retailers. Crypto lender Celsius often paid double-digit interest Bitcoin (BTC 2.82%) and Ethereum deposits, and then lent these assets to other entities to achieve returns. In mid-June, Celsius’ freeze froze when the crypto market plunged, reinforcing fears in an already unstable environment.
In addition, the crypto industry still feels aftershocks from the collapse Terra blockchain, an event that wiped out $ 60 billion and left a once-recognized ecosystem worthless. Crypto hedge Three Arrows Capital, which had invested heavily in Luna, was recently ordered to liquidate its assets after failing to repay loans. One of their creditors, cryptocurrency Voyager Digitalrecently suspended trading and withdrawals due to liquidity problems driven by Three Arrows’ default.
That domino effect is still in motion, but the crypto market has already fallen 71% from its peak, sending $ 2 trillion into smoke. How much longer will cryptocurrency last?
A short story about crypto winters
The crypto market has fallen by 50% or more on four different occasions, including the current downturn. However, Bitcoin consistently accounted for more than 95% of the crypto market until 2013, which means that the first cryptocurrency winter can more accurately be called a Bitcoin winter. Either way, investors can learn something by investigating these events.
The first major crash began in June 2011. Bitcoin lost 93% of its value before reaching its bottom in November 2011, about 162 days later. But Bitcoin did not reach a new high until March 2013, about 631 days after the decline began.
The second major crash started in December 2013. The crypto market lost 81% of its value before reaching its bottom in January 2015, about 406 days later. But the market did not reach a new high until December 2016, approximately 1114 days after the decline began.
The third major crash started in January 2018. Dozens of altcoins had gained popularity at the time, so this event may be the most relevant. The crypto market fell 88% before reaching its bottom in December 2018, approximately 342 days later. But the market did not reach a new high until January 2021, about 1,091 days after the downturn began.
It may take a while
When you combine these three crypto winters, the average time to bottom was 303 days, the average decline was 87%, and the average time to new high was 945 days.
For context, the crypto market peaked last November 10, 2021, which was 235 days ago when this article was written. So if the current cryptocurrency falls exactly in line with the average, we are 68 days away from the bottom and 710 days away from a new high. Of course, each downturn is triggered by different circumstances, and it is impossible to accurately predict the end of any market crash.
In addition, three data points is hardly a reliable number, but it is one of the risks. Cryptocurrency is a relatively new asset class, which means that investors have to navigate in unknown waters. It is no guarantee The cryptocurrency market will ever recover, but for risk-tolerant investors looking to capitalize on the downturn, Bitcoin and Ethereum are backed by a compelling investment challenge.
