Crypto Winter is Coming - Can Crypto Revive from this?

Updated on 5 September, 2022 12:00 PM
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    Edith Yeung, a general partner at Race Capital, noted that the crypto winter has arrived, but it will be a "warm winter", in a  CNBC interview last week. She also stated that while Bitcoin has dropped by even more than half from historic levels, there is more to this scenario than just this. So what exactly is Crypto Winter?

    What is a Crypto Winter?

    The term "crypto winter" refers to a sustained period of low market prices for digital coins. Crypto winter is characterised by price declines and protracted price stability. You must maintain vigilance during this trying time and be ready for sudden mayhem to erupt in the market.


    Where did the term originate?

    The popular HBO series "Game of Thrones" is most likely where the term "crypto winter" originated. Winter Is Coming served as the House of Stark's motto in the television series. It was interpreted as a sign that Westeros could face prolonged war anywhere in the future.


    Why are the Crypto Markets Struggling?

    This year has seen a prolonged crash in the prices of Bitcoin and a lot of other digital currencies. For a time being, the value of BTC had been trying to keep steady around the $28,000 psychological barrier. Additionally under pressure are Ethereum (ETH) and other well-known cryptocurrencies like Cardano (ADA) and Polygon (MATIC).

    Meanwhile, in early June, prominent international cryptocurrency exchanges like Coinbase and Gemini announced hiring restrictions and layoffs. Tyler and Cameron Winklevoss, CEO, and President of Gemini announced in June that they were now in the contraction phase, which is trying to settle into a period of stagnation the crypto industry refers to as 'crypto winter.'

    According to Igor Zakharov, CEO of DBX Digital Ecosystem, the cryptocurrency market was already suffering the effects of global events, particularly the conflict between Russia and Ukraine that wreaked havoc on international banking.

    In the U.S., which is the leading cryptocurrency market, rising interest rates are a result of strong inflation, according to Zakharov. By the time Terra and Luna fell and started a chain reaction in the cryptocurrency world, the "crypto winter" had already started, he claims.


    How ‘Crypto Winter’ is adversely affecting the market

    The crypto industry is currently experiencing unprecedented difficulties. The unwarranted collapse of Terra Luna ignited a nearly $2 trillion drop in cryptocurrency value. Meanwhile, lending firms such as Celsius, which made risky trading bets, ran into liquidity problems and declared bankruptcy.

    CoinShares' head of research, James Butterfill termed this event to be brutal as bitcoin prices had fallen by 74% from peak to downwards at one point.

    Previous Crypto Winters

    The previous cryptocurrency winter lasted from January 2018 to December 2020. The term was most likely coined in 2018 when Bitcoin managed to lose more than half of its market valuation while other cryptocurrencies, such as Ethereum and Litecoin (LTC), fell abruptly.

    Long-term crypto winters eliminate inexperienced startups and provide leading enterprises a chance to develop and validate their offerings. There was a period of phenomenal growth that continued for the majority of 2021 after the crypto winter warmed in late 2020.


    Will there be a ‘Warm Winter’?

    Our last section will be to understand whether crypto can come back strong from this great downfall. Most experts agree that "stronger cryptos" will win when forecasting the future of the cryptocurrency sector.

    Robert Johnson, professor of finance at the Heider College of Business claims, adding that despite the challenges, the bitcoin market may yet recover. Investors see the moment when Bitcoin is selling at roughly $20,000, or around less than 50% of its 52-week high, as a chance to purchase at a discount. Once the global economic and political crisis has passed, crypto users are counting on a cryptocurrency revival.

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