What is Crypto Winter? How to Survive it?

Crypto winter is the season of displeasure for the cryptocurrency market

The cryptocurrency market is experiencing a "crypto winter," or a season of unhappiness. It's a phrase-based mainly on the idea of "Winter is Coming" from the HBO series Game of Thrones, according to which winter is a season of difficulty and strife. Crypto winter is the term used to describe the period when cryptocurrency values are declining.

What is Crypto Winter?

Regarding the traditional financial market, a bear market and a crypto winter are conceptually related. In the winter, bears hibernate, which is not a coincidence in contrast to a bull market, which is characterized by rapid market growth; a bear market is characterized by slower market growth. A bear market in the traditional capital markets is typically considered one when stock values have fallen by 20% from their peaks.

In contrast to the traditional capital markets, there is no specific metric by which a crypto winter happens in the cryptocurrency market. No one regulatory body or agency has declared a crypto winter. Instead, there is a general situation where investors and exchanges experience long-term decreases. In a crypto winter, price decreases often span several cryptocurrencies and last for at least three months.

Crypto winter includes lower overall trading volume over time and lower values for cryptocurrency assets. Due to the drop-in activity, big exchanges like Coinbase have reduced their workforce, a related feature of crypto winter. Gemini, a well-known cryptocurrency exchange founded by the Winklevoss twins, was one of many companies in the sector to announce layoffs in June 2022.

According to a blog post by the Winklevoss twins, "This is where we are now, in the contraction phase that is settling into a period of stasis — what our industry refers to as "crypto winter" The current macroeconomic and geopolitical turmoil has only made things worse."

How to Survive Crypto Winter?

Winters in the cryptocurrency market may terrify investors due to gloomy sentiment, falling prices, and equity losses.

Investors can get through the crypto winter similarly to how they might go through a bear market in traditional equities to emerge back into a future crypto spring with increased confidence and values. The following are some illustrations of potential tactics:

Short Selling: Crypto winter is a loss scenario for individuals who take the long view, buying cheap and selling high. The opposite is true for short sellers, whose objective is to cause a decrease in the price of equity.

Dollar Cost Averaging (DCA): Buying securities (in this case, cryptocurrencies) over time to reduce average purchase costs is a standard tactic for unpredictable equities markets. Investors are more likely to profit from a future rebound under that strategy.

Control Risk: Investors in cryptocurrencies should avoid taking on more risk than they can bear to lose. In favor of more stable cryptocurrency options like Bitcoin and Ethereum, certain volatile assets, such as cryptocurrencies with lesser trading volumes, should be avoided.

Don't Panic: It's unclear how long any crypto winter will continue. The first crypto winter was followed by market expansion and record highs. The traditional equities markets frequently have bear markets, but they invariably see a recovery.