Crypto Winter: Everything You Need To Know

[TL; DR]

Crypto winter is a period or phase where crypto market prices fall and remain low for an extended period.

Crypto enthusiasts and industry players use the crypto winter to signify that the market is at a low point and is expected to last longer.

Crypto winter was derived from the Game of Thrones Television series.

It could also imply an extended period of trouble and difficult times that require vigilance.

Experts opine that the crypto winter is settling in and will take effect in 2022.

Some events signifying a looming crypto winter include the Russia-Ukraine war, the increasing inflation in the United States, and the hike in interest rates by the Federal Reserve.

Other happenings that could lead to crypto winter include the major sell-off by investors and the steep fall from an all-time high price value of Bitcoin, the foremost crypto token.

One major significance of crypto winter is that the phase is followed by exceptional growth in the price value of crypto tokens.

The last crypto winter occurred in 2018 and signals that the next one will occur in 2022.

Keywords: Crypto, winter, tokens, period, phase, crash.

[Full Article]

The cryptocurrency market is currently in its dip phase. Generally, no one envisaged that the “once-booming” crypto market would crash to this extent.

Major crypto tokens like Bitcoin and Ethereum were at their peak price value around November 2021. Investors and holders had a lot of profit margin compared to when they purchased those tokens.

Nonetheless, the crypto market is unregulated and decentralized. There were expectations that the exponential rise might result from a fall in price value, but this drastic fall was not envisaged.

Experts and policymakers in the cryptocurrency ecosystem have various terms to describe the phases of the crypto market. One of those terms is Crypto Winter.

Not to worry, we shall identify the crypto winter terminology and examine the events that signify that the Crypto market is in its {Winter period.

Let's begin!

What Is Crypto Winter?

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Image: Nairametrics

Crypto winter means a period or phase in the crypto market when the prices of various digital tokens fall and remain low for an extended period.

Crypto winter is a phrase used by crypto enthusiasts and industry players to signify that the crypto market is currently at a low point and the condition might last for a very long time.

The etymology of “Crypto Winter” can be traced to the Game of Thrones television series. In the movie series, the House of Stark’s motto is “Winter Is Coming.”

The phrase was supposedly coined from that motto because it signifies the period of looming trouble. In the movie, " Winter Is Coming" is considered a warning to the Land of Westeros that conflict could descend on the land anytime.

Crypto Winter in the Cryptocurrency ecosystem means an extended period of trouble settling in coupled with difficult times. You should remain vigilant and be prepared because the imbroglio will crash the market.

With what is currently happening in the crypto market, analysts opine that the wheels of the looming crypto winter are here and were set in motion in the early days of 2022.

At this point, it is pertinent to identify those conditions and happenings that set the motion for the Crypto Winter.

Events Signifying A Looming Crypto Winter

Image: CoinMarketBag

Experts believe the Russia-Ukraine war is the first major event that signifies a looming Crypto Winter. According to Igor Zakharov, the Chief Executive Officer (CEO) of DBX Digital Ecosystem, the Ukraine and Russia conflict is a significant world event that has caused turmoil in global finance.

Another event is the high inflation rate that has necessitated the constant increase in the interest rates by the United States Federal Reserve. The interest rate is a significant player in the crypto ecosystem, and the continued increase puts fear into crypto investors.

Some of these investors are already selling off their crypto assets, thereby causing a market crash in crypto. No wonder the Crypto market crashed from an all-time high value of $3 trillion in November 2021 to less than $1 trillion in July 2022.

Some experts opine that a steep sell-off from an all-time high in the price of Bitcoin signals the beginning of Crypto winter.

Finally, Igor Zakharov said the horse event that will break the camel’s back is the time when Terra USD and Luna (Stablecoins) crash. “…This crash will set a domino effect in the crypto ecosystem, and crypto Winter will begin.”

It is worth knowing that last week, the first week of July 2022, a unit of Terra USD that was equivalent to $1 dropped to about 30 cents.

Although technically, crypto winter represents a period of losses, it isn't all gloom.

One of the advantages of crypto winter is that it presents an opportunity for big blockchain protocols to solidify their foot and prove their products. As it gets tougher to compete for venture capitalist funds, the big ones will be getting stronger, to the detriment of new startups.

In addition, the past Crypto winter has equipped crypto companies and venture capitalists with knowledge of amassing war chests that they can deploy while the crypto winter phase is ongoing.

Finally, the crypto winter period is always followed by a period of exceptional growth in the crypto market. Shortly after the long crash, the price value of crypto assets will rise exponentially.

Conclusion

This is not the first time the cryptocurrency ecosystem is witnessing a crypto winter, and it won't be the last. The last crypto winter lasted between January 2018 and December 2020. However, the number of crypto users, enthusiasts, and investors was minimal compared to our current numbers.

In 2018, Bitcoin lost more than 50% of its market cap, and the likes of Ethereum and Litecoin dropped drastically. This event characterized the last Crypto Winter.

Experts assert that the crypto winter phase is similar to the bear market, albeit the former phase lasts longer and might weed out young crypto startups.

Author: Valentine. A, Gate.io Researcher

This article represents only the researcher's views and does not constitute investment suggestions.

Gate.io reserves all rights to this article. Reposting of the article will be permitted, provided Gate.io is referenced. In all cases, legal action will be taken due to copyright infringement.