FxBrokerReviews.org – All eyes have been on Bitcoin since the early May stablecoin crisis (BTC). It is the leading indicator of the cryptocurrency market, and before this week’s significant downturn, the price of BTC had been battling to cling to the psychological level of $28,000.
What Is Crypto Winter
A market for cryptocurrencies that are not functioning well is referred to as “crypto winter” in popular parlance. Similar to a bear market on the stock market, this phrase. A “crypto winter” is characterized by unfavorable sentiment and declining average asset values across a wide range of digital currencies.
According to research, investor mindset is significantly impacted by crypto winters. When examining the price history of cryptocurrencies, it can be simple to identify a crypto winter because the downturn may accompany a double-digit percentage decline in cryptocurrency values.
What Causes Crypto Winter
According to analysts, the start of a crypto winter typically coincides with a sharp sell-off from a record high in the price of Bitcoin.
In November 2021, BTC reached a 52-week high of $68,990 before beginning a protracted decline. Bitcoin has suffered significant losses over the past seven months, falling roughly 70% between November 2021 and mid-June. The Celsius scandal has coincided with the most recent leg down. From its 52-week low, the original cryptocurrency has gained some ground and is currently trading at about $22,600.
As of this writing, the second-largest cryptocurrency, Ethereum, has decreased by 74% from its peak in November.
According to experts, the June downturn is worsening because of prospects for further Federal Reserve monetary policy tightening, and institutional investors drive sales.
Anyone who bought Bitcoin in the last year would have lost money because the value of the original cryptocurrency has fallen.
Before the previous crypto winter, the price of Bitcoin rose to a peak of about $19,500 in 2017 before plummeting to less than $3,300 in 2018, a loss of at least 83%.
When Is Crypto Winter
Several crypto-related businesses are currently experiencing severe financial problems, including insolvency. The cryptocurrency exchanges FTX and FTX.US filed for Chapter 11 bankruptcy in November 2022. The effects of this crypto meltdown are still being felt. The term “crypto winter” has been used to describe this market cooling spell.
How Long Does A Crypto Winter Last
BTC’s ATH of over $69,000 on November 10, 2021, has fallen by about 66% in 2022. Ether’s price has also decreased, dropping by over 68% from its all-time high on November 16, 2021. As the third crypto winter begins, the market cap of the whole cryptocurrency industry has decreased by $2 trillion in just over eight months. In this crypto winter, some analysts believe cryptocurrencies may fall even further.
Previous crypto winters lasted a few years, and the bear market in 2022 might do the same.
How To Survive Crypto Winter
Consider this advice to weather a crypto winter if falling cryptocurrency values give you the motion sickness of a roller coaster:
- Never risk more money than you can afford to lose. It’s still early for cryptocurrency. It’s precarious. A wise investor will only invest what they can afford to lose. Putting your entire life savings into a cryptocurrency is not a good idea.
- Thoroughly assess each cryptocurrency initiative. Every coin and token has a different managing organization or volunteer group. Some have turned out to be frauds. It’s crucial to carefully assess each cryptocurrency project before determining how much to invest while the market is chaotic.
- Avoid adopting a herd mentality. Even though WallStreetBets and other online forums are enjoyable for learning about and discussing investing, you should follow only some of the suggestions.
- Changing your portfolio is OK. According to the sunk cost principle in poker, folding a hand is challenging even if you’ve previously placed a sizable stake.
- You should buy the dip. On the other hand, if you think the current bear market in cryptocurrencies is only temporary, you should invest at lower prices to buy low and grow your portfolio’s value as the markets recover.
In 2022, the price of cryptocurrencies fell, and some businesses experienced financial difficulties. Tips for surviving a harsh winter will help you somewhat combat your dread.