What is a crypto winter?

Region: Europe
Aug 20, 2022, 8:00:00 AM Published By Wirex Team

Has dabbling in crypto left you feeling cold lately? There’s only one thing to blame – the ongoing crypto winter.

But what exactly is a crypto winter, and when will it start to thaw? Let’s find out.

What is it?

“Crypto winter" is a term that many believe came from the popular TV show, Game of Thrones. Rather than a period of lasting conflict, however, it’s used in crypto to describe a prolonged bearish period, in which prices remain low for an extended stretch of time.

The current crypto winter set in earlier this year, when crypto prices began to decline. Since then, the market has displayed a consistent downward trend, and sadly, it's too soon to say when it might end.

But why did it begin in the first place? Well, there could have been a few reasons.

What caused it?

A combination of different factors may have caused the crypto market to take a turn earlier in the year, including high inflation, rising interest rates and the financial turmoil caused by the war in Ukraine.

Add to that the collapse of stablecoin UST and its sister token LUNA in May, and the halting of withdrawals by crypto lending platform Celsius in June, and the market was left looking a little on the frigid side.

The crypto market took hit after hit this year. So, is it really any wonder that winter took hold?

Are there any advantages?

It might all sound like doom and gloom, but believe it or not, a crypto winter can have its advantages.

For one, they offer a pretty good way of filtering out the good from the bad when it comes to crypto projects. Those that survive periods like this are typically ones to watch in the future.

It’s often said that a crypto winter is the perfect time to buy, too. But while buying the dip has proven to be a successful strategy for some, it’s certainly not always the case – it's important to do your research before deciding to take a chance on those bear market bargains.

Another bright side to crypto winters is that once they’re over, they're usually followed by a long period of reliable growth in terms of crypto prices. So, there’s that to look forward to.

When will it be over?

When spring will begin to bloom in the crypto market is anyone’s guess.

Some believe that looking back at previous crypto winters can help give us an indication. The previous one began in January 2018 and lasted approximately 18 months. But the crypto market was a very different place back then – there was little to no regulation in place, and people were still wary of crypto following the high failure rate of the ICO era.

Could the current crypto winter follow a similar pattern, or is it only a matter of time before the market bounces back? I guess we’ll just have to wait and see.