Crypto winter is a period in the crypto market when prices of major coins fall dramatically from all-time highs.
A crypto winter could be triggered by many factors, including regulatory change, lack of demand, increased difficulty and accumulation of unsustainable highs. However, the top three occurrences that lead to a crypto winter are market crashes, exchange hacks/breakdowns and overregulation by governments.
Market crashes happen sporadically and have a tremendous impact on the price of coins. The ideal way to avoid countering a market crash is to identify its root causes to prevent future surprises.
The previous crypto winter began in January 2018 and lasted until December 2020. Looking at the past for direction, we can see that a crypto winter behaves like a traditional bear market. In the long-term, weak startups are weeded out while allowing stronger companies to grow and prove the strengths of their products.
A bear market is said to take place when the price of financial assets decreases continually. Most financial experts agree that a 20% or more price drop is considered “bearish.”
A bear market is also often characterized by irrationality and pessimism, leading to prices falling even further. Bear markets can continue on for a few weeks or several months. In the traditional financial markets, bear markets have been known to last for as long as 20 years.
Within the crypto world, a crypto winter refers to a season when financial assets are frozen or do not appreciate. During this time, crypto-assets do not have far-reaching appeal and are not in demand or seen as valuable assets. Crypto winters are usually witnessed between two bull cycles, when the initial wide-eyed excitement regarding the crypto markets dies down.
Join the thousands already learning crypto!