What is Crypto Winter? How to Survive it?

What is Crypto Winter? How to Survive it?

Currently, the cryptocurrency market is going through a “crypto winter,” or a bad time of year. It’s a saying that is mostly based on the concept of “Winter is Coming” from the HBO television series Game of Thrones, which holds that winter is a time of adversity and conflict. The period when bitcoin values are falling is referred to as the “crypto winter.”

What is Crypto Winter?

A bearish market and a crypto winter are conceptually connected to the conventional financial market. Bears hibernate in the winter, which is not a coincidence given that a bear market has slower market growth than a bull market, which has faster market growth. The traditional financial systems commonly define a bear market as one when the value of stocks has dropped 20% from their peaks. In contrast to the regular capital markets, the cryptocurrency market does not have a defined metric by which a crypto winter is measured. There is no crypto winter, according to any regulatory body or organization. Instead, there is a general circumstance in which traders and investors encounter long-term declines. 

Crypto winter is characterized by declining asset values and overall volume of trade over time. Large exchanges like Coinbase have cut their employment as a result of the decline in activity, which is a related aspect of the crypto winter. The Winklevoss twins created the well-known cryptocurrency exchange Gemini, which was one of many businesses in the industry to declare layoffs in June 2022. The Winklevoss brothers wrote in a blog post that “this is where they are currently, in the stage of contraction that is settling into a period of stillness – what our business refers to as “crypto winter” The current geopolitical and financial unrest has simply made matters worse.

How to Get Through the Crypto Winter?

Winters on the bitcoin market may be terrifying for investors because of the pessimistic mood, declining prices, and equity losses. Similar to how they may navigate a bear market with conventional equities, investors can get over the crypto winter and come out stronger and more confident for the coming crypto spring. Perhaps the most reliable gauge of bitcoin values is the S&P Bitcoin Broad Digital Market Index.

Dow Jones Indices S&P. Its name is “S&P cryptocurrency Broad Digital Market Index.” This measure is currently around 70% below its most recent peak, making a crypto winter obvious. Several examples of such strategies are provided below:

  • Short Selling: To those who take a long-term perspective, buying low and selling high, crypto winter is a loss situation. For short sellers, who want to lower the price of stock, the situation is the exact reverse. It’s still early for cryptocurrency. It’s extremely unstable and hazardous. Never spend more money than one can afford to lose, according to a savvy investor. It’s not a good idea to invest all of your savings in cryptocurrency.  A substantial and abrupt price decrease in the cryptocurrency market may result from panic selling. When a large number of people sell their positions, the price drops quickly. This tendency is frequently brought on by some unfavorable signals, which are frequently transmitted through gossip, fear, and exaggeration.
  • Dollar Cost Averaging (DCA): When using dollar-cost averaging, first choose the overall amount one wants to invest and the investment product(s) they want to use, such as stocks, cryptocurrencies, commodities, etc. Then, over a predetermined period, one can invest the money in smaller, equal parts rather than all at once.  A common strategy for unpredictably fluctuating equity markets is to gradually accumulate assets (in this example, cryptocurrencies) to lower average purchasing costs. Under such a technique, investors are more likely to make money from a future recovery.
  • Control Risk: Cryptocurrency investors should refrain from taking on greater hazards than they can afford to lose. Certain unpredictable assets, such as cryptocurrencies with lower trading volumes, should be avoided in favour of more reliable cryptocurrency choices like Bitcoin and Ethereum.  Each coin and token is associated with a unique managing organization or volunteer group. Some have shown to be con artists. Before selecting how much money to invest in a cryptocurrency project when it seems like the Wild West, it’s crucial to properly assess each one.
  • Don’t Panic: Any crypto winter’s expected duration is unknown. Market expansion and all-time highs came after the first crypto winter. Despite the regular bear markets that the traditional equity markets experience, they always experience a recovery. Investors may be impacted by this circumstance in several ways.  Some people may be concerned about potential losses because their positions are already in the negative. Others might be compelled to sell because they are afraid, they won’t make a profit, even when their positions haven’t generated the fair or desired profit. Whatever the case, panic selling prevents traders from taking advantage of any trading opportunities and frequently leaves them in a worse position than when they first opened the account.

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About Maria Morgan

Maria Morgan is a full-time cryptocurrency journalist at Coinography. She is graduate in Political Science and Journalism from London, her writing is centered around cryptocurrency news, regulation and policy-making across the glob.

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