In 2022, the “crypto winter” greatly affected cryptocurrencies. Bitcoin, Ethereum, and others faced a significant drop of over 55% in their prices. This has significantly affected the traders and made them imagine the worst-case scenarios.
By April 2023, Bitcoin prices crossed $30K, making some investors and analysts believe that the crypto winter was over. However, some warned that Bitcoin and other cryptocurrencies were still not showing signs of improvement.
In this article, we will talk about the crypto winter in detail. We will begin by explaining what it is and why it happens. After that, we will estimate when the crypto winter will end. So let’s start!
What Is Crypto Winter?
Crypto winter is a prolonged period of pricing weakness in the cryptocurrency industry. This is a bear market, referring to a significant decrease in cryptocurrency prices and market capitalization. It is generally recognized when exchanges and investors witness continued declines in multiple cryptocurrencies over at least three months. This drop causes a negative sentiment and a lack of interest in buying digital currencies.
The crypto winterdraws inspiration from the famous phrase “Winter Is Coming” in the TV show “Game of Thrones,” which means potential conflicts. During this challenging time, vigilance and patience are essential, as there are no warning signals. It last occurred in 2018 when Bitcoin dropped to $3k. It was a tough time!
More than that, crypto winter is not just about traders or investors; it can even involve the employees of the exchanges. Take the example of Gemini, a popular crypto exchange, when they announced layoffs in 2022. Thus, the fall of Bitcoin means problems at all levels, whether employees, investors or traders.
Causes of the Recent Crypto Winter
As we explained, crypto winter meaning is when cryptocurrency values go down, and fewer people buy or trade them. In 2022, the crypto market experienced a big drop, which made investors lose confidence in crypto again. Let’s look at why this happened in detail.
Companies Going Bankrupt
Some popular crypto companies had severe problems during this time. Celsius Network, a crypto bank, stopped people from taking their money out and went bankrupt. Another company, Three Arrows Capital, couldn’t pay back the money they borrowed and also declared bankruptcy. These problems made people lose trust in the crypto market.
Finally, we have the closure of the Silicon Valley Bank (SVB). This fall was like a KO to the crypto market; it is considered the biggest failure in the US since the 2008 financial crisis.
TerraUSD and LUNA Breakdown
In 2022, there was a big problem with these UST and LUNA cryptos. These coins were supposed to be stable and safe, but they ended up causing a lot of trouble. People bet that LUNA would be the next Bitcoin within a few years.
UST was supposed to have a steady price of one dollar, and LUNA was expected to be like a regular cryptocurrency that could go up in value. They were connected, so if you had one, you could exchange it for the other.
But in May 2022, everything fell apart. The LUNA’s value, $116 in April, dropped dramatically to just a tiny fraction of a penny. The situation was like a classic bank run, everyone tried to get their money out. It was a scary time for investors and businesses that rely on crypto in general, a moment of doubt. This breakdown will stay in people’s minds even after the crypto winter ends.
The Russian-Ukrainian Conflict
The war between Russia and Ukraine wasn’t good news for the cryptocurrency market. Some clever researchers discovered that when people searched a lot about the war on Google, the prices of cryptocurrencies like Bitcoin, Cardano, and Ethereum went down. Why? Crypto investors feared the war and wanted more money instead of keeping their crypto assets. So, they sold them, and that made the prices go down.
When Will It Over?
For those wondering when will crypto winter end? It is difficult to determine precisely a specific date. Some experts look at historical trends to guess when the market might improve, but they must consider other issues happening across the world. Another idea people talk about is the Bitcoin halving cycle, which might mean things start improving in late 2023 or early 2024.But there’s more! The big picture, like how the economy is doing, like inflation and interest rates, also affects cryptocurrencies.
So, is crypto winter over? It’s hard to say for sure, but many things need to happen for crypto to improve.
Future Of Crypto
In 2023, the future of cryptocurrencies still looks promising. Individuals will invest more in crypto and participate in its adoption. We will witness more people counting on Bitcoin and Ethereum’s success. Moreover, regulatory frameworks will become more evident. Undoubtedly, by enacting laws, we are strengthening trust among cryptocurrency users.
Furthermore, we will see cooperation between crypto and traditional banks. It is a win-win situation because cryptocurrencies need to increase their presence in society, while conventional banks must ride the wave of development.
Finally, technological developments will address scalability and speed of transactions. Decentralized finance (DeFi) will continue to expand, providing innovative financial services.
Is the crypto winter over? As you know, previous cryptocurrency winters lasted not just months but years; the same can happen with the current bear market. However, all of the information shared above is here to help you predict the next move for Bitcoin and other cryptocurrencies.
How does predicting the end of the crypto winter impact lenders and their analysis?
Lenders need to consider factors such as market sentiment, price trends, and the overall survival of cryptocurrencies to determine when it is viable to provide loans and how it will affect their lending portfolio.
Can blockchain and NFTs contribute to the recovery and survival of the crypto market?
Blockchain and NFTs can revive the crypto market. They enhance trust, attract investors, and spur innovation.