The crypto space is not new to cycles of bull and bear. Similar to any assets, the crypto markets are also volatile in nature. This volatility can be caused due to the overall market sentiments or it can also happen due to the rise in the supply of the crypto assets as opposed to the demand.
Since the beginning of 2022, the crypto space has been experiencing almost a steady downward slide. The bearish market has taken a longer phase and now the crypto market is going through a cycle that the investors are calling ‘crypto winter’.
What is Crypto Winter?
Crypto winter is the prolonged bearish phase of the crypto market, when the assets are going through a steady down-slide. In the crypto space, a ‘crypto winter’ is something that runs along those similar lines of the bear market. A crypto winter signifies negative sentiment and lower average asset values among a large swath of digital assets.
How Is Crypto Winter Different From a Bear Market?
If we are to simply explain it, in traditional finance and stock markets, a ‘bear market’ is described as a conditioning in which prices of securities in a market decline by more than 20% from their recent highs, often accompanied by negative investor sentiment and declining economic prospects.
In the crypto space, a ‘crypto winter’ is something that runs along those similar lines. A crypto winter signifies negative sentiment and lower average asset values among a large swath of digital assets.
Read more on What is Crypto Bear Market?
How has Crypto Winter Affect Cryptos like Bitcoin, Ethereum & Other Altcoins?
The sentiments regarding the crypto market depend from investor to investor. Some are of the opinion that crypto winter is a good time to explore more assets ad some think of strategizing their portfolio and waiting for the market to correct itself a little for them to sell off the assets.
Since December 2021, the crypto market has seen some of the top crypto assets like Bitcoin and Ethereum losing out on their values. During this period, BTC lost over 60%, and ETH lost over 70%. The steady decline in the value of some top-performing crypto along with various economic news in general has led to a bear phase in the crypto space.
This behavior of the markets and assets has led many investors to think that the crypto space is in its bearish phase for 2022 and might recover soon. Whereas some extremely pessimistic crypto investors believe the market is about to enter a crypto winter, in which prices plummet with no sign of recovery in sight. However, the volatile nature of the crypto assets is something that remains to be seen. Demand for the assets may soon rise, balancing supply and stabilizing the prices, or investors may continue to sell, driving the price down.
Read more on Reasons for Crypto Crash
5 BEST WAYS TO HANDLE CRYPTO WINTER:
- Resist the Urge to Sell in Panic: Oftentimes when the volatile crypto market acts up, investors sell the crypto assets in their portfolio. It is better to keep a long-term perspective when it comes to selling your crypto tokens during a ‘crypto market crash’ period. Looking back, the crypto ecosystem has already seen a few drastic drops in prices for some crypto tokens. However, they have bounced back in value and have also garnered better yearly percentage growth.
- Do not Panic Buy: As the experts say, when the crypto market is correcting itself, it is not a smart move to either panic sell or panic buy any crypto assets. Investors should always have a certain amount of INR dedicated to their crypto assets and invest only when they have conducted a thorough DYOR of the crypto tokens.While the crypto winter is highlighting some of the top-performing crypto tokens losing out on value, it also shows some low-value tokens go up in their value and market cap. Nonetheless, investing in any crypto asset should be made once the investor has conducted a thorough analysis and market research.
- Make use of the Dip: As important as it is to DYOR before investing in a certain crypto asset, it also gives the investor a perspective of what token might have a long-term performance possibility. Given that is the case, small market fluctuations are of use because it provides the opportunity to acquire any token that might have been on an investor’s watchlist. Other than that, it also opens door to investors to acquire more of their favorite crypto tokens!
- Analyze the market behavior: As known as the crypto winters are to the crypto community, it is also important to understand why the crash has happened and how the market is behaving because of it. Situations like Elon Musk promoting DogeCoin are also an occurrence that may contribute to a crypto market shuffle. Thus, it is important to understand what is causing the crypto winter.
- Stick to your Crypto Investment Goals: Experts are always of the opinion that only a certain part of your portfolio should be dedicated to crypto and that segment should be divided into various crypto projects that interest the investor. Making use of the DYOR analysis and following the goals attached to it should be the investing behavior of the investors.
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Crypto Bear Market Investing Strategy
Now that we have taken a breather from understanding the crypto bear market, it is imperative to also take a look at the strategies that may help in cracking the bear market phase for investors. Here are some of the well-known strategies that seasoned investors often applies for their portfolios.
- Buy the dip: After thorough research, if any project stands out for you, it can be a cheap way to explore the project. While the market is going through the bear phase, often high-volume crypto assets are easier to acquire for new investors as the prices go down.
- Dollar Cost Averaging: So far we have established that the crypto space is not new to episodes of bear and bull markets. Thus, DCA is a smart strategy to imbibe for investors. Dollar-cost averaging refers to the investment strategy wherein an investor divides the total invested amount across periodic purchases of the asset with an effort to reduce the impact of volatility on the overall purchase.
- Diversify: Diversifying your crypto portfolio is one of the most important ways of investing. Scatter the available funds in various tokens rather than putting in all the funds in only one token of choice.
- Rebalance your portfolio: Over time, your crypto assets can appreciate and depreciate and it can happen more quickly than your cash or bond holdings. This might push your portfolio out of alignment. However, this should not be seen as adversity. Investors must consider it as an opportunity to re-address the imbalances that have occurred.
Important Crypto Taxation Guides you should read!
The total market value of the crypto market fell below $1 trillion as of 20 June 2022, and at the time of writing, the crypto market was at a value of $872 billion. Though the crypto space is not a stranger to bear and bull markets, it is important to understand that the markets, especially the crypto markets are extremely volatile. To help you navigate through the markets, the above mentions pointers are the few indicators that might help you with understanding a crypto winters and how to strategize your investor movements during a time like this.
As crypto experts suggest, the volatility of the crypto market requires in-depth analysis to land a conclusion. Understand the reasons behind the crash and invest according to your views. If you are new to the crypto space, explore the CoinDCX App to understand the prices and create your watchlist or explore a long-term investing strategy with crypto SIP.
What is Crypto Winter?
A crypto winter signifies negative sentiment and lower average asset values among a large swath of digital assets.
Read more articles on Crypto Bear Market below:
- Crypto Bear Market 2018 vs 2022
- Top Crypto Bear Market Indicators
- How to Prepare for Crypto Crash
- Crypto Bear Market Survival Guide
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