What is Crypto Winter?
The words “cold” and “winter” in a financial setting or in the sense of cryptocurrency trading imply that the prices of multiple cryptocurrencies have collapsed at once and they seem to be frozen at the bottom itself or may even drop further. This may cause the investors to become wary while trading or make their interest wane in those cryptocurrencies.
It is opposed to the word “hot” which implies that a particular cryptocurrency or cryptocurrency trading as a whole, is currently popular among the masses and the market is pretty alive and happening; in the sense, that a particular cryptocurrency is one of the top choices among the traders or they are trading frequently and in large volumes and the value of multiple cryptocurrencies is increasing as well.
Hence, Crypto Winter can be defined as a period during which the prices of almost all the cryptocurrencies drastically drop below a normal bullish trend value, and the market as a whole collapses and does not seem to recover for a long period of time. These deep selloffs are followed by periods of flat trading (trading with very less fluctuation in prices) at low prices.
Past crypto winters
Bitcoin increased exponentially in October and November 2013, before plummeting by 87 percent through January 2016.
The second time, in 2017, Bitcoin’s price nearly doubled, only to plummet by 84 percent the following year. Rumors of a probable crypto prohibition in South Korea sparked the initial freezing and cold in the market, after that, it did not take long for the trade to go downhill. The largest crypto OTC market in Japan was hacked. The compromised Binance API keys were then exploited for malicious purposes. Then Facebook, Google, and Twitter made it illegal to advertise ICOs and token sales. Not only Bitcoin, but the other cryptocurrencies also fell by nearly 80% from January to September 2018. It wasn’t until late 2020 that the market as a whole regained its earlier height.
How grim is the situation now?
For that we shall analyse the happenings and current scenarios in the three major crypto markets, India, the United States and China.
Bitcoin fell 30 percent, Ether 40 percent, and Dogecoin 45 percent on May 19, 2021, indicating a potential cold spell in the trade and market.
Many factors contributed to this, including Elon Musk’s unfavourable tweets and announcement, regarding how Tesla shall no longer be accepting Bitcoins because of the hefty toll it takes on the environment when new Bitcoins are mined. The crypto market as a whole came crashing down afterwards. The People’s Bank of China made an anti-crypto declaration, and the start of regulatory action against Binance and finally declared all crypto transactions as illegal.
In the United States, the Securities and Exchange Commission (SEC) had issued a warning about bitcoin futures, and the Office of the Comptroller of the Currency (OCC) began an investigation of all previous crypto bank operations.
There was a similar frenzy of events in India, which started in May when ICICI and PayTM Payments bank blocked crypto transactions. SBI followed suit, issuing a warning to its clients that using credit cards for cryptocurrency transactions could result in the suspension or cancellation of their SBI credit cards and banned crypto exchanges from using its UPI in September.
Bitcoin funds are still bleeding more than four months after the May 19th crypto meltdown. Bitcoin has lost over 34% of its value in May and continues to lose everyday and the whole market also falls by an average of 4% everyday, facing funds outflow from the trade and market.
Winter is coming?
So is it time for us to say the Stark words for the crypto market?
With all the financial experts and investors chary because of the current scenarios and happenings, a hot summer in trade cannot be expected anytime soon, with the obvious exception of an occasional bull run of some particular crypto token or coin due to factors like implementation of hard forks, positive press and so on.
So to conclude..
It is pretty clear that Crypto Winter is a cyclic phenomenon with each crest-ward movement driven by a new group of enthusiastic buyers, followed by a downfall which forces many of this lot to withdraw all their funds and leave the market. Hence, even if we are looking at an imminent crypto winter or hopefully are in the middle of one, it shall pass sooner or later, giving way to hot bullish markets.
If you’re interested to read more on these technologies, you can check out Kryptopedia.
