The term 'crypto-winter' came to notice in 2018 I guess when crypto faced it's first recession. It lasted just for two years form 2017 to 2019. Then happened something unespected. The first of it's kind started flying. Its brothers also started doing well. They together flied high and reached the top. If you fly high, always there is chance to fall down. As prospected, they got a downtrun in 2022 and still continues. As winter, it won't last long, till election!?馃
Source: pixabay
Why is this winter?
The factors which contribute to crypto winter are of different kinds. As a single point can't be pin pointed, in general it can be said that a combination of macroinconomic, regulatory factors and marcket sentiments are the main causes to lead a long perood of downturn in crypto.
Macroeconomic factors have direct link to condition of markets over the globe, specially liqudity in financial markets. As speculative assets crytos are highly sensitive to interest rates and inflation.
The pandamic COVID-19 casued surge in liquidity which lead crypto to the rapid rise in 2020 to 2021. But after covid as economy began to recover and inflation surged, Governments world wide tightened thier policies to contribute to crypto winter.
When central banks tries to control inflation imposing high interest rates or tightens policies in other ways, liqudity dries up and investors try to play risk free games withdrawing theirs assests.
Fall of FTX , collapse of stable coins like Terra USD are the good exlamles. Besides a lot of crypto business goes bankrupt. While many are limping in lack of liqudities, some with good projects and base still look prominent to survive the downfall.
Security and tech challenges is one of the causes of downturn. Cryptos operate on the cutting age of technology but yet these innovations always face risks. Scams , Hacks and system failure are commnon in this space. Falling of luna , a stable coin, is the horrible example that scared investors.Theft of users' fund from wallet and exchanges will aways have a bad impact on market confidence. While dcalability and consumption of energy is another concern.
Psycology and sentiment matters. Crypto market is relatively young. So, Lack of historical data separates it form tradional ones. In that scenario, analysing crypto is not that easy and so here sentiments may play a significant role. The downturn can also be volatile if people goes according to their sentiments.
In conclusion it can be oppined that the winters in this space is inevitable and summer is prospective. The investors and developers, Inspite of facing challenges, find oppertunities to innovate , maturation to grow within the space. Challenges at present will eventually pave the way for the future adding one more history to it. As more as it gets old accumulating more and more memoir, it will find more permanence.
As sentiment drives us, it can be assumed after genreal election of US, Downturn may reverse itself. Let's hope for the good. Is anyone of you agile to look her again, the figure Sexy-Nine? 69k!!
Views made here are personal. Considering it to take financial decissions is completely up to you. You are the sole owner to handle your assets, so be free and be decentralied. Good luck goes with you.
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