Understanding Crypto Winters

Understanding Crypto Winters

Typically, cryptocurrencies are pretty off the mark compared to their glory days. Bitcoin-the largest crypto is around 65% off its all-time high. And it is not only Bitcoin; other altcoins are also going through the same. Assets such as Ethereum, Cardano, and Polygon have all fallen by more than 59% from their all-time highs.

All these, according to experts, are signs of the next crypto winter. The last crypto winter that began around January 2018 lasted almost three years. If winter is truly upon us, the million-dollar question is how long cryptocurrencies can survive.

Crypto winter 

The phrase “crypto winter” has its roots in the TV show Game of Thrones. In the series, “Winter is Coming” is a motto that warns of impending conflicts. The phrase warns that more trouble might be heading our way in the current crypto market. It is crucial to remain vigilant and prepared during such times, as chaos can sweep the market at any moment.

By definition, crypto winter is a period where crypto prices generally remain low with little or no activity to the upside. According to experts, the foundation of the next crypto winter was set as early as January 2022. DBX Digital Ecosystem CEO Igor Zakharov mentioned that at the start of the year, world events already affected cryptocurrencies. Igor said the Russia-Ukraine conflict hugely impacted global finances.

He added that high inflation rates in the United States of America, a key player in crypto, have also worsened the situation. According to Igor, the fall of Luna and TerraUSD back in May ushered in a domino effect that swept the entire market. From a writing of around $3 trillion in November 2021, the crypto market has collapsed to about $1 trillion. That’s more than a 60% fall.

Effects of Crypto winters

It is important to note that crypto winter also affects companies associated with crypto trading, which means that people associated with these companies are also affected. Many crypto and blockchain-based firms have already experienced massive losses, forcing them to lay off. One of the affected companies includes Hodlnaut-a crypto lending firm. The firm announced on August 19 that it had been forced to lay off more than 80% of its workforce.

The bear market also forced Robinhood to make an additional 23% layoff in August after making an 8% layoff in April this year. Robinhood, also known as HOOD, is a crypto-based company that allows users to trade crypto on their platform. Another crypto-based firm, OpenSea was also forced to lay off around 20% of its workforce in July. Other firms, such as Crypto.com and BlockFi, were forced to let go of 400 employees in June.

Do Crypto winters have Advantages?

As mentioned, this is not the first-time crypto winter is upon investors. The previous one kicked off in January 2018 when Bitcoin lost more than half its market cap while other cryptos, such as Ethereum and Litecoin, fell sharply. Crypto winters are not that different from a traditional bear market. They enable investors differentiate weak projects from strong ones.

The CEO of Uncommon, Jake Weiner, says that in 2021 many soft projects were eliminated from the market and warns that more will face the same fate this winter. There is no specific date for the return of soaring cryptos. However, experts unanimously agree that at the end of crypto winter, only vital projects will prevail.

Are you wondering about your next Crypto investment strategy? Worry not; talk to an expert today at: info@dna-consultancysolutions.co.uk

Image Source: Adobe Stock

Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

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