Many panic sellers have lost a lot of money, and everyone else will be looking at a deflated portfolio, wondering how long crypto winter will last.
The global market cap has dived from $3 trillion to its current valuation of around $900 billion. It's also worth highlighting that every top 10 digital asset is currently down approximately 70% from its all-time high value. Even the team at Coinbase and its AOL of crypto reputation has seen its stock fall almost 80% from the all-time highs seen in November 2021.
Elsewhere, Rug pulls of NFTs have become a regular occurrence, and Terra's Luna token went from a valuation of $40 billion to losing nearly all its value within a week. The $2 trillion crash has made headlines for bankruptcies, liquidations, layoffs, and record withdrawals instead of the 10,000% gain investors have been chasing.
The impacts of crypto winter
Although the crypto market has always been notoriously volatile, it's still unclear how long until the turbulence in the market will clear and when we will fully understand the impacts of what has happened in recent months. As a result, we can expect many crypto companies to face mounting debts as the reality of client withdrawals kicks in.
Bear markets also have a reputation for shaking out weak hands. In crypto terms, many projects built on future promises will exit the game along with the investors the market needs to grow. Investors should also be wary of crypto exchanges falling and remember the most crucial rule in crypto, "Not your keys, not your coins."
Many investors took a gamble on crypto to protect themselves against inflation. But that bet is now looking uncertain in the West. It's very early days for the global crypto market, and mainstream adoption is still a few years away. However, developing countries appear to be leading the way forward.
According to data acquired by Finbold, around 10% of the global population with internet access owns some form of cryptocurrency. Thailand is the most prominent early adopter with 20.1%, followed closely by users in Nigeria and the Philippines. But the US is way down in 14th place with a share of 12.7%. In contrast to the West, more and more of the unbanked population in developing countries are turning to crypto to stay one step ahead of the rising inflation costs amid local currency devaluations and reaping the rewards.
Keeping warm during crypto winter
With so much uncertainty and even Coinbase share price tumbling, it's a good time to remove coins from exchanges and store them in a wallet. In addition, don't panic sell at an 80% loss. You'll regret it when the good times return, and nobody wants to see a repeat of the story where Laszlo Hanyecz paid 10,000 Bitcoins for two Papa John's pizzas in 2010, only to know that they would go on to be worth $650 million in 2021.
The most significant crypto coins are available at knockdown sale prices. But you should never invest more than you can afford to lose. For the prices to increase, the market needs more adoption from investors with disposable income. The bad news is most people are more concerned with the rising fuel, energy, and food prices. There is no escaping that very few people have the luxury of investing in anything right now.
However, it's also important to remember that markets, including equities and commodities, have also taken a hit as speculation around hyperinflation and a global recession intensifies. A recent report by Grayscale advised that the current bear market could last another 250 days. The most important thing to remember is that crypto spring will always return no matter how uncertain things may seem.
Managing your emotions when investing in crypto
Investing based on emotion, whether through greed or fear of missing out, is the main reason so many new investors buy at market highs and sell at market lows. Many will invest their time hanging out in echo chambers on Telegram or Discord defending their coin of choice like their favorite sports team and end up unable to see beyond their confirmation bias.
Buying low is not always the answer, and the price drop could fool you into thinking you are grabbing a bargain when something else is happening. Maybe the original developers have moved on to something else, or the community has spotted something that questions the project's future. Ultimately, there is no avoiding the fact that when you attempt to play the market, prices can rise and fall dramatically every day, resulting in many investors letting their emotions take over and panic, selling at an all-time low.
Is crypto spring on the horizon?
History doesn't repeat itself, but it often rhymes, and it's easy to see why many analysts are predicting we are heading for something similar to the collapse of the dot-com bubble in the late nineties. There are many parallels between investors pumping vast sums of cash into Internet-based startups that promised to change the world with crypto investors trying to identify the next Google or Amazon that will rule Web3.
If we are to learn anything from our internet past, it's that crypto winter will flush out the hundreds of meaningless projects and meme coins built on hype or pump and dump campaigns. Instead of trying to play the market or go all in on the next big thing, investors should research technical projects that are solving real-world problems and look destined to play a big part in the future of Web3.
Crypto is not a way to make quick and easy money for most investors, and the market is designed to separate you from your hard-earned cash. Anyone who tells you differently has too much skin in the game or fooling you into making a big mistake. Whether investing in stocks, shares, silver, gold, or crypto, leaving your money in something you believe in for months or years could offer you the best rewards.
However, finding a crypto project that will thrive in the future and become a lucrative investment is the question that nobody has the answer to, no matter what any self-proclaimed expert will try to tell you. The only thing you can be certain of is that the bull market will return, but when is anyone’s guess?
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