The crypto winter is nothing new in the industry. In fact, prices have continuously experienced rises and downturns ever since digital assets were invented. But this crypto winter seems to be colder than the others, and experts predict it could also last longer. But that may not necessarily be a bad thing. Despite the rough times in the industry, some are still optimistic, and that’s because they believe blockchain has a bright future and can potentially revolutionize the Internet. In fact, blockchain has already proved how it can make a difference in the world, changing how businesses operate.
For long-term investors, this challenge the market is facing could actually be an opportunity in disguise. Unlike the stock market, crypto has a relatively short history, and yet, it has proved over time its ability to recover after the losses it experiences. Looking back, investors who kept building their portfolios despite price fluctuations reaped considerable returns.
The boom and bust cycle is a normalcy in the crypto space
Cryptocurrency started with Bitcoin – the first digital asset developed in 2009. That was the beginning of a new era for finance, and the market expanded from a singular crypto to stablecoins, smart contract platforms, tokens, etc. Both Ethereum and Bitcoin – the leading cryptocurrencies in the market- hit a peak just a year ago, impacting the collective value of crypto’s market cap. However, their glory moment didn’t last forever, and the two cryptocurrencies went from a significant high to a price decline that can seem scary to new investors. But the truth is, this has always been the case with crypto – volatility is part of the market.
However, it doesn’t have to be the enemy – at least not if you look at the bigger picture.
In 2013, crypto hit an all-time high, followed by a descent in 2015, affecting Bitcoin’s value. But in early 2018, prices reached a new high again. However, they were short-lived, as the market went through a new crypto winter in the same year, hitting rock bottom in January 2019. It took two and a half years for the market to recover, but in November 2021, bitcoin price saw a meteoric rise. As excruciating as the crash is, crypto has been here before – and not just once. But after each decimation, it experienced a significant rally.
The economic uncertainty creates additional pressures
Things may be a bit different this time because the economy itself isn’t in the best shape. Since Bitcoin’s inception, the stock market has experienced a significant bull market – one of the most extended in history. But now, it has seen a decline in prices, and factors like inflation hinder economic growth. Although crypto advocates say about the greater economy not being related to crypto, it’s obvious that the former impacts the latter – especially in times of economic uncertainty. Since everything is getting more costly, investors are less likely to put their money into cryptocurrencies.
Due to economic struggles, the market could have a hard time recovering.
Generally, it takes around three years for the market to experience its previous highs, but the increasing possibility of a recession can further complicate things. If this crypto winter goes through the same path as the previous ones and the scenario of a potential recession, it could take between two to three years before the market reclaims its old position.
Finding the silver lining during challenging times
Considering all these factors, some investors may be hopeless about the future. However, considering historical data of crypto, investors have benefited the most from these challenging times in the market. But it would be unrealistic to expect the return to highs will happen overnight. It will likely take around three years, so it’s best to keep a long-term perspective on things. Even if it lasts longer, once the crypto winter ends, investors may ultimately experience great returns. Of course, there are no guarantees about that, so it’s vital to see investing as a marathon instead of a sprint.
Consistency is key in navigating this rough crypto winter because it allows you to maximize profits if prices hit a peak once again. Bull markets may be an opportunity to make money, but surviving the bear market may lead to even greater profits. There are some ways investors can maximize potential, such as prioritizing those digital assets with a strong track record. That’s the safest way to play because it is unlikely for cryptos like Ethereum or Bitcoin to completely lose their value forever, considering their performance during previous years.
There was never a better time for investors to analyze their strategy than now. An effective strategy is indispensable when it comes to seeing returns from your investments. Just as important is staying informed on what’s happening in the market, as that’s the only way to make informed decisions.
The current crypto winter doesn’t mark the end of the industry
No one likes uncertainty or experiencing a sudden low after a high. And while it’s true that the crypto market can be confusing, you can achieve peace of mind by adopting a long-term mindset and staying optimistic. You don’t have to make your entire life about crypto, and building patience and discipline will be genuinely rewarding in the long run.
Things may seem dark now, but there is a light at the end of the tunnel, and many lessons can be learned from the crypto winter. Investors often engage in unsound behavior, and greed takes over, leading to irrational decisions that often result in losses. These difficult times show that it’s imperative to adopt a new approach where one keeps their judgment.
Once the crypto winter moves into a crypto spring, investors will be more resilient and more likely to keep their emotions out of their investment choices. Instead of seeing it as the crypto apocalypse, investors should take the latest events in the market as a valuable lesson. In a highly volatile industry, risk management remains imperative in order to minimize losses as much as possible.