Crypto Winter is Here! How Long Will It Last?

  • July 22, 2022
  • Jennifer Moore

During the steamy summer weather, crypto investors are in the grip of crypto winter and reconsidering their relationship with digital assets. The idea of Bitcoin was first generated after the financial crisis of 2008. However, after the recent crash in the crypto market, the belief of Bitcoin being a hedge against inflation has been broken. In the past year, the rising Bitcoin prices led to a growth of fear of missing out among investors. However, after the price drop, investors are becoming prey to crypto winter.

In May 2022, the stablecoin TerraUSD crashed and sent a shockwave throughout the crypto market. Bitcoins have been suffering for quite some time to remain near $28,000 before reaching their lowest this week. However, other than Bitcoins, leading coins like Cardano, Polygon, and Ethereum are all down up to 60%. In the meantime, various worldwide crypto exchange platforms announced laying off their workforce after suffering a loss due to the crypto crash.

Many crypto experts could predict that “winter is coming” for the crypto market. The contraction phase that is occurring in the crypto community may be referred to as the “crypto winter”. PayBito chief Mr. Raj Chowdhury states, “The present geopolitical chaos and the macroeconomic situation may have acted as a trigger for the current devolution. However, this too shall pass, and crypto will make a dynamic comeback”. 

Also Read: Renewable Bitcoin Mining Ratio Reaches 59.50%: BTC Mining Council

Crypto Winter: What is it?

The term “Crypto Winter” likely originated from the Nuclear Winter hypothesis. After the crash of the stablecoin TerraUSD in the month of May, the crypto market was shaken taking the majority of the investments underwater. 

The experts predict that the bearish market will last for longer, forcing many exchange platforms to lay off their workforce. The investors must be prepared as chaos may clear out the market without early warnings. Experts suspect 2022 not to be the year for crypto investors, as the motion for “crypto winter” started in the early months and may continue for a longer period of time. 

CEO of DBX ecosystem, Igor Zakharov asserts that the crypto market was affected by various global events including the conflict between Ukraine and Russia that caused economic turmoil around the World. The interest rates in the United States were increasing due to inflation that has hugely participated in the recent crypto crash. Since its highest in November of 2021, the market capitalization of cryptocurrencies has hit its lowest, from three trillion dollars to less than one trillion dollars. 

Also Read: Blockchain Analytics Play An Important Role For The Growth of the Global Cryptosphere

How Can The Crypto Winter Market Be Beneficial?

Crypto is a volatile market, and this is not the first time, the bearish weather has taken over. The Crypto market suffered its last crash from January 2018 to December 2020. In 2018, when Bitcoin almost lost half of its market capitalization, along with other cryptocurrencies facing a sharp drop, “crypto winter” was first termed by experts. 

The crypto winter situation is similar to other asset class bearish situations. Therefore, the results are also likely to be no different. The small startups and exchange platforms may wipe out, while the whales may get a chance to prove their products and grow. 

Even with the 60% decline in the crypto market crash, many exchange platforms were on a hiring spree like PayBito. The PayBito chief, also a blockchain pioneer, asserted, “PayBito is planning to increase its workforce strength and hire over a hundred employees across its development centers in India and Dubai”. He has also highlighted the consequences of the stablecoin crash, and the emergence of a crypto regulatory framework to control the volatile market.

The wrath of the crypto winter will not only affect the small startups, but if the period extends for a long period of time, the whales in the industry might as well suffer. The major positive of the situation is that, similar to the previous crypto winter that relaxed at the end of 2020, the crypto ecosystem observed huge growth. Experts predict a similar situation might take place once the winter is over. 

Crypto Winter Analytics

Analysts suggest the winter started with a down price from the high price with the crash of stablecoin TerraUSD. In November 2021, Bitcoin observed a record-breaking $68,990 before starting its downward trend. In the past seven months of the year, there has been a 70% decline with the recent downfall after the celsius scandal. Today, Bitcoin stands at $22,600. 

Since last year November, the Ethereum price has fallen by 74%. With the current situation of the crypto market, the monetary policy of the federal reserve is tightening and is expected to get worse in the coming months. Large institutions are selling off their investments in the current winter phase. Last year, Tesla made an investment of $1.5 billion and agreed to accept crypto as a payment method. However, with the ongoing liquidity crisis, the company sell off 75% of its Bitcoin this week. 

Investors that invested in crypto last year, are underwater at present and suffering a huge loss. Before the downfall of Bitcoin at $3,300 in 2018, the highest was $19,500 in 2017. An overall loss of 83% in Bitcoin. 

Will Crypto Bounce Back?

When it comes to future predictions, experts suggest that the “strong cryptos” will live through. Crypto might not have a huge comeback as it did in 2021, mostly because the federal reserve monetary policy has become the headwind for the asset class. However, crypto will come back and rise to its true potential with time. 

While last year’s investors are weeping at the present scenario, many investors are actually taking advantage of the plunge to observe the market doubling down for a long time period. Many investors bought the dip and are willing to wait for the profits, once the economic turmoil settles down. 

Wrapping Up

There is a famous saying “buy when there’s blood in the streets”. Crypto winter may be a huge disappointment for investors, exchanges, and startups, but this shall pass too. Crypto is a volatile market, making it a risky asset. However, as CEO of Fidelity Investments Abigail Johnson asserts, if there is a belief in a long-term comeback when everybody is dipping out, you double down and wait to see the maximum return.

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