2022 has been a year of incredible fluctuations in the cryptocurrency market. Some of the most popular coins went from 1st place to 30th place within a few weeks. This is a huge drop in cost, but this is only one factor that has contributed to Bitcoin and many other cryptos starting to trend downward.
Bitcoin has been in the market for nine years now, and the coin has experienced an incredible rise in value. As it neared its all-time high of 20k USD per Bitcoin, investors started getting scared about what would happen when it plummeted back down to earth and prices stabilized again.
What is crypto winter exactly?
The term “crypto winter” refers to a period of market decline, which lasts much longer than a typical bear market. While a typical bear market lasts six months or less and the price of cryptocurrencies falls by 40%, crypto winters last for an average of 12-18 months and can see the price drop by 60% or more.
There have been multiple bear markets as the price of Bitcoin has increased at a treacherous pace over the years. The most recent recession took place in 2013 and lasted for around three months, where Bitcoins fell from $1,200 USD to just $130 USD.
What does crypto winter look like?
A crypto winter starts at a certain point, usually when a significant number of investors or users start holding on to their assets instead of selling them off. The crypto community then realizes that prices are going to take a hit and everyone starts panicking.
Once the coin is listed on popular exchanges, everyone rushes to sell it before it goes any lower. As soon as the market value drops by half, investors start getting suspicious that there is no market growth.
Why is crypto winter bad for investors? Crypto winters last a lot longer than other bear markets. They can last up to 18 months, which is two-to-three times as long as the typical bear market. So what’s the big deal?
Think of it this way: imagine investing in Bitcoin at $1,000 USD and expecting it to go up over time. If it drops to $200 USD and stays there for a while, investors stop believing in that currency and start selling their coins, causing the market to drop even more.
This is why crypto winters are so scary because they tend to last longer than other market crashes. When investors get scared and sell off their assets, the only thing they do is make the market crash even harder.