2018 was the last time there was a massive downward spiral in the trade cryptocurrency markets. Even though the cryptocurrency market has always been financially volatile, 2018 took the cake when it came to a crypto winter. There was an upward surge of around $830 billion and then a sudden downward movement to $100 million in a year.
In May 2022, Stablecoin had a financial meltdown, causing those who trade cryptocurrency to look at other top cryptos, like Bitcoin. BTC became the standard that would inform them if this year would have a crypto winter or not. By September 2022, Bitcoin was struggling to maintain its market position at the threshold of $28,000. It was not only BTC that was the cause of concern. Ethereum (ETH), Polygon (MATIC) and Cardano (ADA) have all been plummeting since September 2022.
With layoffs and a lack of hiring notices, cryptocurrency exchanges have been undergoing a difficult period. Gemini and Coinbase have seen their shares fall at the rate of 86% in 52 weeks. The word ‘crypto winter‘ has been doing the rounds for quite a few months now, and it is high time all cryptocurrency enthusiasts get an idea about what it is. This article will provide all the necessary details regarding the approaching crypto winter and which cryptos may outlast this period.
What is crypto winter?
As investors, you might have come across the term ‘bear market’ when it comes to stock investments. A ‘crypto winter’ is similar, but also slightly different. Like the Game of Thrones tagline that announces “Winter is Coming”, a crypto winter functions as a warning for an extended period of financial conflict.
Crypto winter vs Bear market
The following are some key differences between a crypto winter and a bear market:
- Crypto winter is applicable only to the cryptocurrency market, while “ bear market” is a term that functions in stock investments as well.
- Crypto winter is applicable when the market runs sideways and the returns are flat and stagnant. In a bear market, the market goes downhill steadily.
Crypto winters usually commence when the general populace involved in crypto farming is no longer all that invested anymore. This could be a result of fatigue or even sociocultural and political conditions. Several experts such as Igor Zakharov, the CEO of DBX Digital Ecosystem have made their statements regarding the crypto winter. He thinks that the early crypto winter could be a result of the Russia-Ukraine conflict that has upset the global financial system. High inflation rates (especially in the US) have also led to a reduced interest in cryptocurrency.
Are there any advantages to crypto winter?
As stated earlier, this is not the first winter that the world of cryptocurrency has seen. The last spell started in January 2018 and lasted till December 2020. During this period, Bitcoin lost around half of its capital investment and the other cryptocurrencies struggled to stay afloat.
Crypto winters spell trouble for two sections of the market:
- Cryptocurrency Enthusiasts (Buyers): The winter brings back the high-risk factor in crypto as an asset. Once the liquidity is taken away from the market, speculative assets are hit the most. And crypto is a speculative asset like no other. This is a cause of alarm to those who trade cryptocurrency.
- Young crypto startups: A long period of winter could spell doom for crypto startups. They will not be able to deal with the lack of buyers and the collapse of the market with no saved arsenal to depend upon.
Unlike 2018, however, the good news is that the bigger crypto companies have amassed enough wealth to tide over this unwelcome period of winter hibernation. The crypto winter could also usher in a new era of crypto products, since during the crypto winter, crypto trading prices tend to be much cheaper than before.
How can you survive crypto winter?
Surviving crypto winter might be tough, especially if you have a lot depending on an investment. However, it is not impossible. The following are the tricks that could enable you to trade cryptocurrency during a crypto winter:
- Distribute your assets: Remember the proverb and do not keep all your eggs in one basket. Experts have ruled that diversifying your crypto assets works wonders on your investment portfolio. Dividing your investment into small, low-index funds may help keep you in the safe zone, especially when you are dealing with a high-risk investment such as crypto.
- Do your research: Crypto winter is the time when buyers can read up on the basics of crypto once again. This is the time to make sure that you are up-to-date with the technologies and the new products.
- Don’t go overboard: It is essential that you understand crypto is a speculative investment. This means that you should not go overboard with the amount you put into crypto as there are no stable or guaranteed returns.
Which cryptos can you buy during this crypto winter?
The following are two of the cryptocurrencies that you can buy during this crypto winter (other than the super-stable Bitcoin and Ethereum):
- Polkadot: If you wish to trade cryptocurrency during this winter period, then Polkadot may an option. Polkadot was created by Gavin Wood, whose dream project was decentralizing the internet. This trade cryptocurrency is similar to ETH. In fact, Polkadot introduced the para-chains system that allows tokens to be transferred between cryptos. Polkadot ranks after ETH and has also been selling para-chains since November 2021. The risk is low here.
- Fantom: This trade cryptocurrency is slowly ranking higher in the crypto buyer index. This is because the Lachesis algorithm lets the crypto platform process thousands of transactions in a second, and at the cost of a fraction of the fee that you pay for ETH.
- Which cryptocurrencies may survive?
The following are some of the cryptocurrencies that could survive this crypto winter:
- Bitcoin and Bitcoin Cash: Being the top cryptocurrency out there, Bitcoin has a reservoir of wealth that will never let it shut, even during winter.
- Litecoin: This is an intermediary of Bitcoin and is a top asset of the winter.
- ETH and Populous: ETH is the second most important cryptocurrency and has plans in place to outlast this winter.
- Dash: Being a niche cryptocurrency, Dash has set up large markets in Spain and Zimbabwe.
- NEO: Funded by giants such as Microsoft China and more, NEO is State-backed and thus always in the game.
Conclusion
When it comes to crypto winter, the greatest advantage you can have is to buy crypto in bulk at a heavily discounted price. If 2018 is to be looked back upon, then the financial market will bounce back into position soon enough. This means that you will get returns on the bulk crypto investments you buy during the winter. Note that any trade cryptocurrency is a speculative asset and is subject to market risks.
