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The point at which the crypto market or a particular cryptocurrency experiences a huge downturn is known as crypto winter. A market is said to be bearish when it loses its value which in turn causes a significant reduction in the price of the concerned cryptocurrencies. Despite the fact that bearish markets are bad to investment, experts show that it’s the best time to invest.
Interestingly, many people — at this stage — find themselves losing interest in the crypto market due to major downturn that happened recently. The fear of losing all their capital and available profits led them to sell out their tokens at a lower price. Having said that, the question arising is who are those buying these tokens even at the market lowest?
In this article, we’d look at the major downturn events that take place recently and how it affects the industry. We’ll also look at possible opportunities in those happenings and how you can leverage crypto winter as a retail trader or large-scale investor.
Bearish Market and Crypto Winter
A market is said to be bearish when it experiences an extended deflation in price of investments. The standard benchmark for a bearish market is a 20% reduction in broad market index with respect to the market’s recent high. There can be a bearish market for individual stocks as well as a market as a whole.
For example, if the recent high price of Dogecoin is $50,000 — just saying though, don’t look at me that way. The cryptocurrency will be said to have gone bearish if and only if that price reduces by 20% or more. The major advantage of bearish market is just that it provides an avenue for long-term investors to buy more for less.
Similar to a bearish market, crypto winter is also a prolonged reduction in prices of assets in the cryptocurrency market. That is, it is the second case of bearish market which involves the market as a whole. It can happen randomly to cryptocurrencies or collectively affect a large number of crypto assets.
Since there’s no standard model for price prediction, it is difficult and challenging to predict the outbreak of crypto winter. For less experienced investors, it is the toughest time in their investor journey. As stated earlier, long-term investors resort to “buying the dip” hoping that the market will rebound at the end of the long run.
Significant happenings in the Crypto Market in 2022
The cryptocurrency market experienced a major crash in early 2022 alongside other global financial markets.
Price Reduction
1. Bitcoin and Ethereum Price Drop: Bitcoin fell to $19,617 on July 13, 2022, while Ethereum dipped to $1,431
2. Dogecoin price drop: Dogecoin fell to $0.06154 alongside several other top cryptocurrencies like Cardano (ADA), XRP, and Solana, among others.
Layoffs
1. Crypto.com layoffs: Crypto.com lay off over 2,000 employees which accounted for about 40% of its total staff. Although the company understated this value in their report, CoinDesk reported that about 30% — 40% of the staff were laid off. Early this year, the company lay off 260 employees (5% of the total workforce).
2. Unchained Capital reduced its workforce by 15% on November 18, 2022. Coinbase reduced 60 job positions; Meta lay off 11,000 workers Mythical Games lays off 10% of the workforce and lots more.
3. Valkyrie investments Inc.: The crypto ETF provider let go of 30% of its employee recently as crypto winter begin.
Other companies affected include BitMEX, Buenbit, Bitso, 2TM, Bitpanda, Bullish.com, etc.
Collapse
1. FTX Bankruptcy: FTX crashed recently after experiencing multiple customer withdrawals earlier in the month of November. The founder of the company reportedly claimed that the available assets in reserve are not enough to satisfy customer demand.
2. Luna Collapse: On May 7, over $2 billion worth of UST was unstaked and hundreds of millions of it were liquidated. This brought down the price of UST to $0.91. When the Luna crypto network crashed, an estimated amount of $60 billion got wiped out of the digital currency space.
3. 3AC: The Three Arrows Capital was affected by the collapse of Luna as it was forced to liquidate.
The collapse of the world’s second exchange has created an environment of uncertainty and incredible opportunity in the crypto industry. While it is a bad omen for those planning to join the crypto market, it is considered an indicator that the crypto and web3 industry is promising.
Giving fairness a chance, the collapse and bankruptcy of FTX is a credible player in the market and also pointed stakeholders at the vulnerability of the ecosystem. As much as there are surrounding challenges, there are more underlying opportunities like buying.
According to Coindesk’s Glenn Williams: “What doesn’t wipe out blockchain and other crypto ventures makes them stronger as new fortified iterations of themselves.
Elon Musk was reported to have said that, even though the winter of the market might be long, Bitcoin will succeed. According to the Tesla CEO in a space held on twitter, the future is Bitcoin, Ethereum and Dogecoin.
According to a tweep (@FroogCo):
Crypto market down bad
Nfts down bad
Defi down bad
It’s the best time to double down on this space when most people lost faith in it.
Start working in Web3 today and position yourself for the next, inevitable cycle. You’ll come out as a legend.
~ @Froog (Web3 Job Board) 9:38 AM | 21 Nov 22
The bottom line is that the downturn of the market doesn’t translate that the crypto, blockchain, or web3 are not promising or that they are coming to an end soon. In fact, this is just the beginning of a decentralized financial platform that puts core personal values into check.
The likes of SFB are figured out by the fierce sword of integrity that blockchain technology promises.
Kindly share your thoughts about the future of cryptocurrency, blockchain, and web3. Do you think this crypto winter will be long or short and what happen afterwards?
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