Crypto-Winter in 2022

Published:11 November 2022 Updated:4 January 2024

Crypto-winter is a prolonged decline in the quotations of many digital assets. As a rule, its indicator is the rate of the flagship Bitcoinwhich influences the trends of the crypto market more than any other. This phenomenon is often observed when the Bitcoin exchange rate crosses a historical low. Noting this, big players fix profits, which affects the quotations. The reason for the onset of crypto-winter may also be external factors, such as the tightening of regulation by various countries cryptocurrencies and hacker attacks.

Recently, BTC fell to another low. As a result, more than $300 billion disappeared from the market in less than a week. Analysts believe that a collapse of Bitcoin to 8,000 USD is possible. Experts believe that rising interest rates in the U.S. could cause a decline in the price.

Crypto-Winter in 2022

Factors influencing the onset of Crypto-winter 2022

To understand how long the Crypto-winter may last in 2022, we first need to understand what led to it. Since the beginning of the year, we can note such factors that may have influenced the development of events:

  • BTC began to fall steadily, it was “supported” by almost all popular coins.
  • Tight control by the Fed, which affected not only the cryptocurrency, but the entire financial market. Investors began to sell risky assets.
  • High inflation in the United States. Its rates are reaching records for the last decades. And this affects cryptocurrency as well.
  • Miners and hodlers were leaving the crypto market.
  • Stablecoin’s fall in May. Not only BTC experienced pressure, but also ETH and altcoins.
  • Falling Terra and the decoupling of UST from the USD. This led to a loss of 60 billion USD.
  • Many crypto exchanges announced layoffs and hiring freezes. Along with these events, shares of some exchanges fell.

But it is worth noting that the crypto-winter is caused by many factors, so how long this phenomenon will last depends not only on the decisions of governments, but also on the “mood” of the market.

After the FTX exchange collapse was announced, the 2023 cryptozyme in the cryptocurrency market becomes an obvious fact. Most likely, some tokens and projects will disappear, not withstanding the crisis. As for the main players in the market, namely Bitcoin and Tether, they may lose positions, but will stay afloat. Bitcoin began to rapidly lose value amid failed Binance/FTX negotiations and the subsequent bankruptcy of FTX. As for USDT, they are not related to FTX or Alameda Research, so the token’s position is stable. This is due to the provision of liquidity due to the linkage to USD and U.S. securities. Against the background of unstable geopolitical situation, the situation may become more complicated as a result of global military conflicts involving the United States. Based on this, we can conclude that the crypto winter will probably be long and the collapse of the first major player in the crypto industry may be its beginning.

Kirill Nikonov Specialist in cryptocurrency analysis

How long will crypto-winter last

Researchers from South Korea believe that crypto-winter may end before the end of the fiscal year. But at the same time, they believe that the U.S. Federal Reserve’s attempts to support America’s economy may have an impact on the crypto market. Other analysts believe that crypto-winter will last a few more months, but will end before the end of the 4th quarter of this fiscal year.

Experts drew a parallel between this crypto-winter and the recession that began in 2018. They noted that the recessions are similar. In 2018, a tightening of monetary policy by the Fed of the United States led to this state of affairs. Therefore, one should pay attention to when the Fed’s stance might change.

Some analysts believe that changes should be expected in Q4 as inflation will decline. At the same time, there is an opinion that the Fed’s rate hike policy will not last very long either. The Fed is likely to start cutting rates before the end of 2022. BTC prices may bottom out in November, but will begin to stabilize by the end of this year, according to cryptocurrency market researchers. There are three other theories held by different analysts:

  • Holders who have been holding coins for several years are selling them. Some investors wait out the situation, and big players accumulate assets at a reduced price. BTC rate will stop at $17-18 thousand and then it will go up.
  • Since investors don’t want to work against the backdrop of inflation in America, the market is going into negative territory. As a result, bond yields went up. Since the crypto market is linked to the U.S. stock market, its collapse was followed by a collapse in altcoin quotations. At the same time, many exchanges are stopping operations and refusing to withdraw user funds. Therefore, BTC can be fixed only at the level of $10,000.
  • The crypto market is waiting for a new anti-record. The end of the crypto-zima is not imminent. After the Federal Reserve rate hike, yields on most assets will fall. Because of this, the fall of cryptocurrency will only intensify.

When will crypto-winter 2022 end?

Having studied the opinions of different analysts, we can understand that all of them predict further events in their own way. Therefore, no one can say exactly when crypto-winter will end. Factors that affect the decline of activity on the crypto market and the collapse of large coins are alarming. But at the same time, many players are still ready for risky investments. Up to 90% crypto-enthusiasts are thinking about buying digital currency in the next 6 months. 30% of them are not thinking about selling their existing currency despite the downturn. It’s hard to predict events yet, but the next few weeks may show what the future holds.

What will be the consequences?

Researchers of the crypto market are sure that when the crypto-winter is over, the sphere will become cleaner, and those projects that manage to survive this crisis will become even stronger. Some companies will leave, but those that remain will be exemplary. As a result, when crypto-winterends, the composition of the currency table may change significantly, and capitalization will drop significantly.

How to survive the crypto-winter: tips for traders

Experts highlight 4 things you can do while waiting for the market to recover:

  • Diversification of assets. The first tip is not to put all your coins into one platform. It is best to invest in small diversified IFs suitable for players of different levels. Since cryptocurrency is a risky investment, allocate no more than 5% of your total portfolio to it.
  • Using a slump to raise. Crypto-winter is a chance to stop and study the crypto market in detail. You can do research to know that there is an understanding of technologies and strategies. You can explore new topics, improve your knowledge of the crypto industry. New knowledge and a real understanding of how the main principles work will come in handy in the future.
  • Conducting research. Often a falling market is used to buy assets at a reduced price. But it is worth doing research first to understand that money is invested in projects with long-term value.
  • Investing wisely. Cryptocurrency is a risky venture for many investors. Therefore, it is worth investing in the crypto market only what you do not regret to lose.
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