One of the most popular stablecoins pegged to the US dollar, terraUSD collapsed in May. After that, the stablecoin circulation decreased by around $38 billion, according to DefiLlama. As a result, crypto investors have set their eyes on Bitcoin as it is a key trendsetter in the cryptocurrency market. However, Bitcoin’s prices are dwindling along with other cryptocurrencies such as Ethereum, Polygon, and Cardano.
It didn’t stop at cryptocurrencies. Even crypto exchanges are facing the aftermath of the stablecoin meltdown. They have laid off many employees and frozen hiring for the moment. This is being dubbed "crypto winter" by cryptocurrency investors. Let’s discuss what crypto winter is in detail.
What is Crypto Winter?
Eugene Etsebeth, a venture capitalist, coined the term “crypto winter” in 2018 after the crypto market crash. It means that the crypto market is performing poorly, and it can be compared to the bear market of the stock market. However, according to Piers Ridyard, the Switzerland-based CEO of RDX Works, when the stock market is bearish, it goes down, but in crypto winters the market goes sideways and is mostly flat. Hence, an investor sees flat returns.
Crypto analysts believe that the seeds of the emerging crypto winter were sown in early 2022. Several world events, high inflation, and increasing interest rates are some of the main reasons behind the crypto winter. Having said that, this is not the first crypto winter we have witnessed. The most recent one was in 2018 when a majority of cryptocurrencies were affected.
When Does the Crypto Winter Begin?
As we’ve already mentioned, the last crypto winter started in 2018 and lasted untill 2020. Due to the extreme volatility of the crypto market, it is hard to predict crypto winter. However, one sign that crypto winter has arrived is Bitcoin’s steep sell-off from an all-time high.
In November 2021, Bitcoin hit $68,000, an all-time high, and after that, prices started tanking, and by mid-June 2022, Bitcoin lost around 70 percent of its value. Additionally, just as it is hard to predict when crypto winter will start, it is also hard to predict when it will end.
How to Survive Crypto Winter
Crypto winter is unpredictable, but this doesn’t mean we cannot prepare for it. Here are some tips to survive a crypto winter.
Don’t Put All of Your Eggs in One Basket
You, as an investor, should always diversify your investment portfolio. Crypto experts also advise investing around 5 percent of your total investments in crypto. They also recommend using different crypto exchanges, crypto wallets, and more.
Refresh Your Knowledge
Crypto winters are an excellent opportunity to learn about things you didn’t understand about the crypto market. It is the perfect time to read, learn, research, and go back to the basic principles of the crypto industry. When the market picks up speed again, you’ll be better equipped with the tools to make the most of it.
Conduct Your Own Research
You can invest in the market when it is down, but make sure you do your research to invest in the right project that can offer long-term value. Crypto analysts recommend investing in large crypto projects, but do your research properly and don’t follow what an influencer is saying.
You should always keep in mind that a crypto market is a volatile place. We cannot accurately predict when a crypto winter will begin or end. Following cryptocurrency news and tracking communities on social media networks can offer insights into investor sentiment and planned investments.