The last major crypto plunge happened in 2018, but crypto is still going strong. If this isn’t enough proof to convince you that there’s reasons to be optimistic about the current bear market, then it’s a good time to reflect and learn from the past.
Despite its downs, crypto is still gaining popularity and social acceptance. Crypto is now more than just assets that live digitally. Blockchain technology continues to be built towards transforming the world and how we view finance. And crypto communities are becoming more resilient than ever.
While speculation, fear, and doubt still seeps in the air. We’ve summarized for you all you need to know about crypto winters, what to expect from them, and why they’re actually good.
What’s a crypto winter, and how does it happen?
“Crypto winters” are when token prices decline, and remain low for an extended period of time. Crypto winters can be anxiety inducing – much like actual snowstorms, being prepared for the worst is required to stay strong.
A lot of factors can influence when crypto winters happen. We can only make guesses as to what creates these plunges.
There’s only so much we can pinpoint to what set 2022’s crypto winter in motion.
The escalation of the Ukrainian-Russian conflict has resulted in not only declines in the fiat financial industry, but has spread ripples into crypto. Inflation is also running rampant throughout the globe, with gas prices continuing to rise, and other commodity prices following suit.
Public opinion on social media also plays a major role. As a result of these factors and more snowballing. The crypto market has dropped since November 2021: a 60% decrease, from $3 trillion to less than $1 trillion. However, crypto markets have grown significantly in user base and resilience, and already have experience with many crypto winters.
What should I expect from a crypto winter?
Four years ago, Bitcoin lost more than half of its market capitalisation. As a result, token prices as a whole dropped quickly. Resulting in the crypto winter of January 2018 to December 2020.
It can be generalized that crypto winters is a “survival of the fittest” sort of situation, where younger crypto projects and startups tend to drop. Competing for investors can be difficult, due to the unpredictability of the situation.
However, there’s already plenty of future-proofing done by not only projects but also investors in order to make these projects sustainable. This crypto winter is different, as venture capitalists, crypto markets, and increased regulation now know how to better cope with the situation.
What’s so special about this crypto winter?
In contrast to the crypto winter of 2018-2020, there has been an increase in how users use crypto and how they operate businesses. In addition, the view that crypto can be seen as a risk asset has been introduced. Liquidity fills the financial market, and creates more incentive to grow the industry.
Crypto saw massive growth from late 2020 to 2021. Thousands of new crypto projects have been launched in the year 2021 alone, gaining more community members to help sustain the industry. Thanks to the NFT and dApp boom in 2021, we now are lucky enough to have even more resources to help the crypto market and community spring back.
This time, crypto is a little bit more mainstream – with NFTs, social tokens, and the metaverse, established companies that have pledged to invest in crypto initiatives have already invested so much in the industry.
With tech giants like Apple, Microsoft, and Meta already influencing public opinion. There’s an added bonus where more people are feeling adventurous to try out DeFi, therefore growing their Web3 user base. As corporate and financial institutions start to embrace crypto. It’s within their interest to help with sustaining its infrastructure and industry.
What’s there to win from any crypto winter?
Think of crypto winters as a prolonged state of bear markets. In the long term, crypto winters give opportunities to developers, artists, and investors to continue in building their products, projects, and community outreach.
On the backend, crypto winters are an opportunity to rethink Web3 business models in order to adapt to the times. No one can really anticipate what would be the next trend, or the cause of the next crash, but it’s a great chance to build projects and products that respond to customer needs quickly, and effectively.
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In these times, blockchain innovations also continue to advance. Cryptographic technology has improved, boasting more features than ever before. The introduction of “layer 2 mechanisms” since 2021 has allowed for the accommodation for a larger amount of transactions on the Ethereum blockchain network. As a result, layer 2 also brought in more tools to improve quality of life in DeFi.
Investors are also presented with opportunities to step into crypto during crypto winters. As prices of assets have experienced significant drops, investors who are looking to diversify their portfolios can purchase tokens like Bitcoin and Ethereum at a discounted price. As blockchain development shows no signs of stagnation with projects eager to stay alive. More investors are putting their trust into hoping that crypto can see spring once the markets feel more stable.
Disclaimer: This article does not in any way represent or provide any financial advice.
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