What does crypto winter mean?

One thing that nobody can deny is the fact that crypto is highly volatile. There will be good days when the value rises and there will be bad days as well. When the crypto market crashes, the effects are felt just as much as when they are on the rise. 

Just like how there’s a bear market when things don’t go so well in the financial markets, digital assets have the cryptocurrency winter. Crypto winter suggests exactly what the current state of the crypto landscape is: cold and barren. When this happens, users get anxious about the dropping prices of their favourite coins, and it’s in their best interest to avoid it at all costs. 

With big names like Bitcoin (BTC) and Ethereum (ETH), crypto winter affects the market so much that it can drastically change the entire layout. With the 2022 fall of BTC and the cascading effects it brought to other coins, a lot of experts are calling it the next crypto winter. For your reference, here is everything you need to know about it: 

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What is crypto winter 

The term crypto winter came from the popular HBO series Game of Thrones. In the show, the House Stark motto was always ‘Winter Is Coming’ suggesting a grim event of the dawn of the whitewalkers that occurred in the season finale of the show. 

Just like its insinuation, a crypto winter is an event in the market that users do not want to look forward to. It’s the time when prices are at their lowest and each coin gets affected by the volatility one by one until there is no value. 

When crypto winter occurs, there is likely going to be a crypto crash that starts the whole catastrophe. Usually, crypto investors withdraw the money from their digital wallets and start to invest it elsewhere, crippling the overall market as a whole. 

What causes crypto winter?

There are a lot of causes of crypto winter that contribute to the overall crypto market crash. If you want to know what they are to avoid this, below are the two main reasons why cryptocurrency winter occurs in the first place: 

Continuous crypto turmoil

What starts as a fluctuation in the prices of crypto can turn into a massive downturn in the whole crypto market. Just like how depression is a continuous loop of recessionary effects, crypto winter is the huge result of a snowball of bad crypto volatility. 

Inflation

Expensive pricing in some crypto can also lead to the crypto winter effect. The higher the prices go, the lower the chances of newer investors coming into the scene. It makes sense since the only way for the market to correct itself is through inflation. 

Is inflation a bad thing? No. In fact, it is necessary for the value of financial assets to continue having said stored value in the first place. However, continuous loops of inflation can hurt the crypto market in the long run as user activity must occur at all times for it to go steadfast. The moment people stop having confidence in buying crypto like BTC and ETH because of their expensive prices, the less likely they are going to succeed moving forward. 

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When is crypto winter?

Unlike the popular ‘Winter’ in Game Of Thrones, it’s hard to make a crypto winter prediction without fully understanding how the market works in the first place. A sudden spike in prices can mean that it’s only in the nature of crypto why that happened instead of calling it the next crypto winter.

Believe it or not, crypto winter has happened before. It began in January 2018 and ended in December 2020 when Bitcoin lost half of its market cap while other coins like Ethereum and Litecoin followed suit. Drastic events like this one are certainly possible. The worst part is that you can never predict with utmost certainty when it is going to happen next. 

How long does a crypto winter last 

The last crypto winter lasted two years. This may seem like a very long time, but considering how the market moves, this isn’t longer than say, the Great Depression which lasted decades. Approximately, crypto winter can last for as short as a year to a decade depending on the severity of the situation.

Will crypto winter occur in 2022? 

Experts have already called the year 2022 the next crypto winter. In 2021, a lot of new investors arrived at the scene due to promising takes of where the market will go. Now, these new investors will be experiencing their first crypto winter and hope to get out of this situation as soon as possible. 

At the beginning of 2022, Bitcoin was trading at around $48,000 but found its value erode rather quickly by spring to down to $18,000. Ethereum was also trading high but quickly fell short to $1,700 after a few weeks Bitcoin dropped. 

General concerns about crypto winter

Since crypto has affected a lot of lives, there are bound to be repercussions from this. Below are potential crypto winter effects that are likely to occur: 

Potential job losses 

There have already been a lot of online businesses that operate under crypto’s influence. For starters, there is a myriad of online casinos and sportsbooks that only accept crypto as their primary payment methods. 

Not only that, but there are also e-commerce sites and even land-based establishments that garner a lot of profits from crypto. When crypto winter persists longer, a lot of jobs can be lost which leads to unemployment rates going up. 

Cascading crypto winter effects on different markets 

As previously mentioned, unemployment can be a direct result of crypto winter. With this, the economy in the grand scheme of things is greatly affected. 

With high rates of unemployment, the general financial markets can take a huge hit. There are also firms that invested heavily in crypto. When crypto winter happens, their investments can largely get affected. 

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Bear market vs crypto winter

Is a bear market the same as crypto winter? To answer this question, crypto winter is more similar to a recession than it is to the bear market itself. So, what is a bear market and how is it similar to crypto winter in any way? 

What’s a bear market? 

A bear market is an activity in the economy where prices are decreasing for longer periods. Unlike a recession where it’s a continuous loop of inflationary activities that lead to a downturn, a bear market is much longer than that which is projected to go for at least 5 years. 

How is it different from crypto winter’s similar occurrences

Crypto winter occurs slowly while a bear market is an official declaration that the economy is at a downturn. A recession can happen, but that doesn’t mean that it’s a bear market definitively. A bear market is more specific in that the prices of securities must go below over 20% to be considered as such. 

A recession in typical economic terms means poor performance in the general markets. Looking at this meaning, you can safely say that crypto winter concepts borrow the same elements. 

Crypto winter survival tips

The crypto market now is prone to its version of a recession. Crypto winter may stay longer or go by like gust, but it’s always best to stay prepared and save your crypto assets. Brace yourselves, as winter is coming to haunt a lot of crypto investors. Below are some crypto winter survival tips to get you started: 

How to survive the crypto winter

The first thing you need to survive the crypto winter is to embody a mindset of not investing more than you can afford to lose. Don’t treat the market as a casino where you can take your chances and run away. Instead, find the discipline to ensure that you have carefully evaluated all your crypto options and do what’s necessary to benefit you during the crypto winter. 

How to profit from a crypto winter

With how prices are low during the crypto winter, it’s best to buy the most affordable crypto assets online to start building wealth for the future. While it’s true that the market is indeed uncertain, what’s sure is that the market will regain its momentum. When that happens, you’ll have saved the money to buy crypto at regular prices after buying them very affordably during the winter. 

While there is a cause for concern, it shouldn’t go far as to feat the actual crypto winter itself. If you know how to survive the desperate times, then it’s going to reward you in the future when crypto will get its shine again. For now, know when it is occurring and make the most out of your crypto investments before it’s too late. 

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Words: Vonn Consul