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How to survive the upcoming “crypto winter”?

Vladlena Martus 2022-10-05

How to survive the upcoming “crypto winter”?

Be careful and on the lookout! This material is for informational purposes only and is not intended to encourage anyone to take action.

We warn you about the dangers and risks associated with cryptocurrencies. This is not a guaranteed profit, not an instant success. Holding your assets in cryptocurrencies more than 5%, you risk losing your investment.


Many in 2021 did not believe that crypto winter would come soon. Crypto-enthusiasts were divided into two groups: some stood up for Bitcoin and other cryptocurrencies, and others thought that the cryptocurrency market was a big bubble (again) and would collapse soon. The depression started sooner than they all thought.

At the beginning of 2022, starting with rallies in Kazakhstan and the war in Ukraine, the primary cryptocurrency began to collapse until it lost 58% of its price, falling to almost $18,000-$19,000 per coin.

In such cases as today, it is customary to say: "History repeats itself" and "Everything is cyclical" because this is the main rule not only of the financial markets but also of history and life in general. In the past of Bitcoin, there have already been at least two falls or, as it is often called, "crypto winter" periods.


Let’s remember the drops and cycles of the Bitcoin price. In short

At some point, history repeats itself, so it is essential to remember the main stages of the leading cryptocurrency development to understand what is happening now and in the future. Bitcoin has already fallen several times, but it has always risen. To understand why Bitcoin fell a couple of times, you need to look at the phases of its movement between 2013-2017. In 2013, the maximum drawdown of Bitcoin was 85% and took 407 days. Next, in 2017 the Bitcoin rate fell by 84% in 364 days. Arcane Research analysts calculated that the current drawdown lasted 229 days with a maximum drop of 73%. 

If the rate follows the plan of these cycles, it will bottom somewhere at the end of the fourth quarter of 2022 and will be around $10,000, although there is always the possibility of a pullback of 85%. Bitcoin is now much more intertwined with the broader financial markets, with federal agencies, US elections, and the stock market impacting its performance. In case of long-term changes in the market structure, Bitcoin could soon reach $9,500-$13,500, but only if the drawdown from peak to a minimum will be 85%.  

The current drop is relatively small compared to what we all have already survived during all of the drawdowns of Bitcoin's price. Surprisingly, even after such mighty falls as today, many still believe Bitcoin copes well enough with volatility and holds its position perfectly ideologically. This is extremely interesting, given the whole background.


What is crypto winter, and what are the reasons?

"Crypto winter" is the drop period in the development of the prices of cryptocurrencies. The low value refers to market quotes that fall below the multi-year highs. 

Investors try to get rid of cryptocurrencies and arrange a panic sale. The news agenda becomes sharply negative, making holders' conditions even worse. Fear, misleading, and the state of being unconfident happen in the market: traders stop opening long positions because of a lack of motivation. Other circumstances and global factors also trigger the "crypto winter" collapse. Thus, it reflects the name itself:

  • Colossal power consumption because at least BTC generation requires considerable electricity. 
     
  • BTC ceases to play the protective asset role because investors prefer physical gold, real estate, and other classic assets in case of difficulties. 
     
  • Growth drivers end during periods of depression because the market quickly reacts to the negative news. 
     
  • Over-regulation of the industry is hardly influencing the cryptocurrency market. For example, the news about the ban on mining in China.
     
  • Market cycle. Usually, it's a 4-year cycle associated with the Bitcoin halving, regular reward for the mined block reducing, etc. 

  • Market euphoria makes greedy investors buy coins at any price. 


How to prepare for the crypto winter and not make mistakes?

The rules of "crypto winter" survival are practically the same as the usual risk management rules. However, let's see them and be ready for the "crypto winter" together! You can also find a couple of these pieces of advice on the Cointelegraph website. 

  1. The main thing to remember for the investor is to understand their acceptable risk level and the amount to lose without sorrow. Do you remember a maximum of 5% risk assets in your portfolio? Great! Keep that in mind!
     
  2. The second important thing is the averaging strategy that "limits the growth potential to mitigate possible losses." 
     
  3. Be attentive to the new crypto projects, as they may succeed! If you understand that the project is worthwhile, you can get generous benefits and become happy even during the "crypto winter" periods! This is advice from the CoinGecko co-founder, Bobby Ong, by the way.
     
  4. Another great piece of advice is…spending more time with friends and family. And, of course, with themselves. The long-term hopes for BTC, ETH, or other altcoins profits for such investors become a stressless issue. Go on a jog, ride a bike or scooter, or walk in the park you've never had time for. Enjoy your life because the market is not going anywhere.
     
  5. In addition, risky guys claim that if you don't buy Bitcoin during these "frozen" times, you may regret it after five years.

Thus, the "crypto winter" is just the period that is worrying enough for every type of investor or trader. You can also check out our blog about the first steps to start trading and the recommendations based on experience and simple living. We hope it also will be helpful for you to read and use some of the points during your trading sessions!

Thus, the “crypto winter” is just the period of time that is worrying enough for every type of investor or trader. You can also check out our blog about the first steps to start trading and the recommendations based on experience and simple living. We hope it also will be helpful for you to read and use some of the points during your trading sessions!


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