If you have been an investor in crypto since 2021, you are now experiencing the first crypto winter. I can say from experience, this is no fun. In 2022, the crypto market has suffered major setbacks. As a crypto investor you know the risks and this should not come as a surprise, but it is taking a very long time now. Chances are that you have already asked yourself: “Shall I sell my crypto?”. Have you wondered this? Then read on quickly.
After the failure of TerraUSD and LUNA, the price of each cryptocurrency fell in the first half of 2022. Several crypto-related companies are currently facing serious financial problems. With still fresh on the retina the bankruptcy of FTX. The effects of these crypto scandals are still being felt.
Crypto right now
Bitcoin, the largest cryptocurrency on the market, was valued at $48,000 in early 2022. But due to the various scandals, uncertain market and rising interest rates, the value dropped below $18,000 in June and at the moment of speaking (19-11-2022) the value of 1 Bitcoin is $16,000. This is a loss of 66%, yes you read that right 66%. The second largest cryptocurrency, Ethereum, was worth $3,700 in early 2022 and is currently $1,200.
You can conclude that the market in 2022 will have a high volatility, but unfortunately negative. Terra Luna has collapsed, DeFi platform celsius has gone bankrupt, Coinbase is laying off thousands of employees and FTX has gone bankrupt. It is no surprise that the cryptomark has collapsed.
The market has been through crypto winters before, but this time is different, according to investors. Experts argue that this is largely due to the influx of new investors from the previous year, as well as the unrealistic expectations and typical volatility in the cryptocurrency market. Novice investors live in a media bubble without thinking about the risks of crypto.
How long will the crypto winter last?
Maxim Manturov, Head of Investment Advice at Freedom Finance Europe, says: “A preliminary analysis on BTC’s behavior shows that the probability of the coin rising after the halving is extremely low. In addition, the crypto market is under pressure due to conflicts in the global market. Looking at history, the first halving took place on November 28, 2012 and the BTC price started to rise a few months later, rising to $1163 per 1 BTC by the end of 2013. The better.com ipo is found online. The second halving happened on July 9, 2016, but it wasn’t until the end of 2017 that Bitcoin’s price rose to $1966. The third BTC halving was at $8700 and we didn’t see a new all-time high until late 2021. The next fourth halving will be in 2024 and only towards the end of 2025 can we hope for BTC to grow.”
Unfortunately, we don’t know (or even if) the current crypto winter will end, but if the pattern of the past is followed, we may not see another surge in value until 2026.
Tips to survive the crypto winter
Cryptocurrency investing follows many of the same principles as stock market investing, but on steroids. Speculating on extremely volatile and risky assets such as cryptocurrency comes with the knowledge that you have a risk of your investment falling in value. We have several tips to protect your investments against declines:
Distribute your portfolio
No matter what market situation you are in, diversification should be your number one priority as an investor. It is important to recognize and weigh the risk associated with cryptocurrency investments given their reputation for high volatility. Invest more of your money in a variety of low-risk assets. Never invest money you can’t afford to lose and keep an emergency fund separate from your regular savings. Advice is: buy shares and then mainly ETFs. ETFs ensure a good spread within your portfolio.
Create a strategy
Large investments in brand new cryptocurrencies may be too risky at the moment. It is important to exercise extreme caution when dealing with new and unknown assets, even though projects are emerging that have been in development for years and could have great potential. It is also wise to keep in mind that your investments may improve if you wait a while before selling them. Whether or not the crypto winter will last for a while, this is the time to assess your current strategy and adjust it if necessary.
It is very important to keep up to date with the latest news, both in crypto and traditional equity markets. The crypto and stock market is in a dangerous market. The current market conditions are not favorable and crazy things can happen. Take FTX as an example. If you were aware of the scandals, you could have taken your crypto off the platform.
Keep in mind that the recovery of the market could take months or years. And never forget: never invest money you can’t lose!