When Will Crypto Winter End?
What is Crypto Winter?
We are in the midst of challenging and ever-changing times where the state of the market is far from being stable. Many businesses and markets still have not recovered from the COVID-19 pandemic, while there are currently many other emerging events that could impact the world economically.
If you haven’t seen our “What do you do during a crypto crash” article, you can find it here. In a general sense, crypto winter essentially means a prolonged poor-performing bear market, which usually starts from a massive sell-off causing prices to plummet.
Why Did It Happen?
We are currently living at the edge of a possible financial crisis where the cost of living is skyrocketing, accompanied by rising inflation and taxation rates. Financial markets across the globe are bleeding, and this trend is not restricted to crypto markets alone. Many factors contribute to this predicament, however, in this article, we will talk about recent notable events that could cause this slump.
(Sharp rise in US yields)
If you don’t know yet, US treasury bond rates are inversely related to riskier financial assets, including crypto. Cryptocurrency is known to be one of the most volatile asset class, thus, there would be an increase in opportunity costs for holding crypto, when the short-term and long-term US yields climb or surpass the 1.5% mark. With projections for the 10Y US Treasury yield to fall between 1.5% and 2.0% this year and rising interest rates, that will inevitably cause downward pressure on crypto markets.
(FUD-”Fear of Uncertainty and Doubt”)
As we know, cryptocurrencies are known to have extreme volatility where there is no underlying intrinsic backing to stabilize crypto prices. More often than not, price actions are heavily dependent on how much people value a certain asset, thus making FUD extremely scary for traders as they could wake up to a huge slump in their portfolio value.
When Will It End?
No one knows when crypto winter will end where there are mixed market sentiments from experts. Some believe that crypto has evolved and will be able to recover faster than previous bear cycles, however many still believe that we will not see another bull market until 2024–2025. Although no one can say for sure how long and what will happen before the recovery, we can consider several indicators like the BTC halving cycle to suggest crypto’s next big return.
In case you are anxious and frantic about the hole in your current crypto portfolio, always remember that “When in doubt, zoom out”. Based on historical records, prices tend to reach a whole new level after each market recovery. It would be comforting to know that the current BTC price, is even higher than the ATH in the previous cycle, which indicates that your patience could be handsomely rewarding. Cryptocurrencies are designed to replace traditional finance, however, there are still a lot of improvements and regulations we have to embed to emerge more robust and better after each fall.