The crypto market has had a wild ride in 2022, with Bitcoin, the most popular cryptocurrency, falling by over 70% to its late 2021 all-time high. It’s not just Bitcoin that the turmoil has impacted. Ethereum and many other crypto coins like Cardano and Polygon have also seen a 50% drop from their all-time highs since then. This ongoing contraction phase has been termed the “crypto winter” and has been tough on crypto investors and professionals who keep the industry alive. While the crypto winter may seem like it has cast a spell over the industry, top crypto and NFT companies are unfazed and view this as an opportunity to stamp their authority in the market. 56% of consumers still maintain that they are mulling over buying various crypto assets within the next year, according to reports from a recent “Paying with Cryptocurrency” survey. This explains why NFT vendors are on overdrive and working closely with renowned NFT marketing agencies like Crypto marketing at Pop Machine Labs to sell their digital assets.
What is “Crypto Winter”?
The term “crypto winter” is thought to come from the tagline “winter is coming” in the Game of Thrones series. It points to a nasty and prolonged forthcoming war and alludes to the fact that things are about to get bad.
In the crypto world, crypto winter is used in place of well-known terms like bear market/downturn in the investment world to show that the industry is undergoing difficult times. Everyone knows cryptocurrencies have been down due to contracting prices and have remained that way for the better part of 2022. This is not the first time crypto winter has engulfed the crypto industry. The immediate last crypto winter lasted about two years, from January 2018 to December 2020, which saw the crypto market value drop sharply, with Bitcoin shedding almost half of its share.
Bear Markets are for Building Strong Foundations
There are many impacts (negative and positive) from a crypto winter – most of which are similar to the effects from a conventional bear market typical with other investment forms. For instance, there were a lot of new crypto startups during the incredible growth phase of 2021. The bad news is that most of them will likely fail as they don’t have enough war chests to cushion themselves during this period – especially if it extends longer than anticipated. We’ve already seen layoffs and job cuts with some major crypto companies, including Coinbase Global, OpenSea, BlockFi, and Crypto.com.
While an unfavorable business climate in the crypto industry seems to exist, some crypto companies are taking advantage of the crypto winter by establishing solid foundations for themselves. In general, one notable advantage of bear markets is the ability for companies to hire top-level talent with the best terms possible. Crypto professionals are more willing to negotiate their terms in the best interests of whoever is hiring during this time. Working arrangements in the crypto world, like hybrid/remote working, will also be driven more by the current crypto winter – which is a win-win situation for crypto companies and professionals.
If you’re a crypto or NFT company looking to hire new people, this is the best time to choose from a broader talent base. Binance (a significant industry player), for instance, is on a hiring spree and is looking to hire over 2,000 new professionals across several regions in a bid to get the best talents into their team.
Valuable Tips from Previous Crypto Winters
Just like in conventional recession periods, there are many things to take home from crypto winters. Bitcoin has taught us that a crypto rebound is viable as it had done in previous crypto winters – even when crypto wasn’t as mainstream as it is presently. Some of the takeaways include;
- Never put all your eggs in one basket – diversifying portfolios is always wise
- Think about investing for the long run
- Have an emergency fund to cushion during crypto winters
- Never panic sell when prices are low or falling; neither should you be too greedy as they rise
Drawdowns are typical in almost every industry and occur approximately every four years in the crypto market. While the regularity in these ups and dips brings a sense of hope to many crypto enthusiasts and professionals, you should keep in mind that recovery can take long – months or even years. Many crypto companies (mainly weaker startups) exposed to the contraction could collapse due to sell-offs or other circumstances. On the flip side, stronger crypto companies always seem to find ways to improve and come out even stronger following a crypto winter. All in all, it’s recommended that you invest only what you can afford to lose when thinking about crypto assets investment.
