Writers carry the message of frozen activities and coldness. Winters have always been visualized as rough and full of sorrow by poets and lyricists across the globe. Similarly, there exists a very popular term in the world of Cryptocurrency. It is known as crypto winter. The exact meaning of the term is a very long period of flat crypto trading followed by a steep crash in the price of the coin.
Bitcoin is currently the world’s largest virtual currency, and its trading affects plenty of major aspects of world finance. So, it is very important to understand the up and down waves in the crypto world to understand its functioning. And today we are going to discover more about it.
Crypto Winter – Trends
If we talk about the recent trends, the finance experts are indeed fearing another Crypto Winter on its way. There has been a significant bitcoin crash. The volatility of the crypto process in the recent scenario is literally waiving off the potential investors and it is for sure not a good sign for the crypto world. There has been a very sharp drop in the pieces of cryptocurrency and that alone is enough to indicate the arrival of another slumpy crypto winter.
For those of you, who have some idea about the functioning and the cycles of the crypto world. There are indeed many advantages of the crypto industry however, all of them come with a cost and one of the major costs is uncertain volatility. Just like any other economic wave, there is a prevalent crest and trough in the operation of the crypto world and that is why every boom in the crypto domain is generally succeeded by a sloth over popularly termed as Crypto Winter.
Recently, the crypto market is following an overall predictable cycle of phenomenal coin price declination succeeded by a flat trading phase. The last time the world witnessed it was in late 2017 and during the early months of 2018 and now there is the probability of another Crypto Winter Season coming up.
On the 24th of January 2022 David Marcus the former head of the Department of Crypto at Facebook (Now called Meta) through a tweet, admitted that there is already a Crypto Winter knocking at the door. Though the tweet wasn’t much pessimistic because he also added that it is during such phases that competent entrepreneurs can reshape their fortune. While pumping tokens has been considered as one of the most. Many eminent finance leaders are unwilling to use the term crypto winter for this phase. Instead, they are trying to put up the phrase “cooling off period” to indicate the market behavior.
Similar downturns have been witnessed in the past and the good news is that such slumps have always been succeeded by the warmth of escalated rallies and investments that enhance the potential of the crypto world.
The crypto tandem with the global stock market is indeed one of the most significant reasons to get worried about right now. Crypto has literally formed that bridge between digital assets and traditional stock markets. That any wreck in the crypto world would bring uncertainty to both the digital assets and the traditional stock world.
Another wink on the face of investors is the falling crypto volume. This has resulted in a significant fall in earnings through IPOs. IPOs have been performing impressive during the past years and the juicy earning from this domain was a great boost for the market. However, whether that potential upswell will remain the same under conditions of such market crashes or not is yet a matter of concern.
The responses and probable fears of this winter have been stated in numerous ways though all the concerns pave way for the same delineating trade picture. There is a fear of aggressive currency tightening as a reaction to this money hike and that undoubtedly will drain the blood of liquidity from the veins of the finance market.
The crypto craze as it is popularly termed is unpredictable. At times it is crazily on the high whereas at times it is on the low. We cannot forget what happened to the Bitcoin rally in 217 and it ultimately getting delisted from the prestigious Nasdaq.
How is the Finance World Reacting to this Change of Seasons?
If we talk about the onset of this recent crypto winter, we must talk about early November 2021. During this time, the gross market value of cryptocurrencies was approximately around $3 trillion, and it faced a slide. Bitcoin was somewhere near $67,000 net worth last year but now it has sloshed down somewhere close to $36,000. This crash is indeed noteworthy and if this trend continues to be followed, the crypto world may be seriously wounded. On the other hand, you cannot really predict much about the crypto world because they can rise high at any time especially because there have been some prominent past examples.
Many people in the Finance world have agreed on the fact that this Crypto Winter may be something different following a track never seen before. This is particularly because the Pandemic has been one of the major reasons for the onset of this Crypto Winter. The pandemic was an unprecedented event that none of the human beings had ever witnessed before. With the trough in the global economic activities during the Pandemic, it was definite that the virtual currency world would be affected but the extent could not be predicted. The pandemic is often considered as the villainous prelude to the current Crypto Winter phases.
Changes to be Expected
But the core concern and focus should not be on what has set in and how is it going to continue. Instead, the core concern should be what are the drastic changes that crypto winters may call upon the finance world and how can those be tackled or toggled at the same time?
One of the most important patterns that must be observed and taken into consideration is that – One cannot predict the long-term status of the Crypto World. Many eminent finance personalities like Siegel, have also expressed concerns that the pandemic has acquainted us with an overall face of uncertainty. In such a phase people may not be interested to invest their wealth in volatile assets like the crypto and instead shift their focus of concern to assets of the solid pedestal (traditional ones).
The bottom phases like Crypto Winter can only be tolerated by companies and investors who have high risk tolerating capacities, are speculative, and have a broad buffer range that will keep them safe despite the volatility. Such investors are indeed difficult to find and thus there may be a deteriorating trend in the crypto world.
Another important fact here is that the members of the crypto world have changed dynamically. Major investment institutions like Coinbase, Tesla, and Block have now invested plenty of their assets in the Crypto World. Billions of their dollars are already there in the Global Crypto Balance Sheet. Hence the price moves in the crypto world are now perceived and manifested differently.
In comparison to the last Crypto Winter, the demographics of the Crypto Industry have changed a lot. There is going to be a robust impact of this demographic change in the Crypto World. The recent territory of the Crypto World is relatively uncharted and hence the changes are also expected to be off the track. The new phase in the crypto lifecycle is dependent on the players in the market now and the recent trends. The way Finance globe is going to respond to it is yet to be scrutinized and indeed would affect the potential of this virtual asset.
The Indian government has put up lots of positive policies for bringing about a boost to the Crypto world. This is expected to leave a positive impact on the Crypto domain. However, investors fear that the downfall of Bitcoin in this crypto winter season may be far reached as to heavily impact every aspect of the crypto trade drastically. The expected crackdowns of the crypto industry are bringing winks on the faces of investors.
To regulate and uplift the condition of crypto and to prevent the crypto winter from being too negative, the U.S government has taken up various steps and is planning to release a complete strategy based on how to escalate the conditions of the crypto market to stay away from the adverse effects of the Crypto Winter. It is essential to figure out some key plans to protect one’s personal and company assets against the delineating effects of crypto winter. It is also important to follow the pre and post crypto winter patterns of the past to have a fair understanding of how things work. However, this crypto winter is going to be something different because the pandemic has key roles to play in here.