Crypto Winter or a New Ice Age? Disaster or Buy-On-The-Dip Opportunity?
The current bear market of 2022 continues to disrupt all cryptocurrencies, including non-fungible tokens (NFT), and the decentralized finance market (Defi). Many link the crypto winter to the ongoing months-long conflict between Russia and Ukraine, as well as the US Federal Reserve’s recent interest rate hike.
However, the crypto space would be careless if it did not take into account the Terra (LUNA) and TerraUSD (UST) tragedy and its impact on the larger market. From a technical analysis perspective, Bitcoin's weakening market sentiment has taken away the confidence of many that it could be the best hedge against inflation and volatility.
So, what scenarios are likely to emerge in the near future?
The Bull Run Isn’t Over Yet?
Much is unclear today, but there is one thing many analysts are predicting: the bear market could last for at least a year.
Today's crypto-winter is reminiscent of the 2018-2019 bear market when bitcoin and major cryptocurrencies collapsed after a euphoric rise in late 2017. So far, it has been one of the most memorable bear markets because of its duration and impact on the space as a whole.
Those who bought their first Bitcoin at the top witnessed their portfolio lose its value to $3,000 per BTC. In short, the bear market of 2018-2019 has been ‘brutal and bloody’. While the current crypto winter has many differences from the previous one, there are reasons to believe that the public sentiment is identical. After failing to meet expectations of a $100,000 rise, Bitcoin now comes in at less than $30,000.
Meanwhile, LUNA may have met its demise as it was worth $0.0002011 at the time of press, compared to its all-time high of $119 just a month ago.
Stablecoins Under Severe Test
Stablecoins are also taking huge hits. The UST is currently priced at less than $0.5 while Tether (USDT) fell to $0.98, which is uncharacteristic. This forced Tether to engage a third party to execute a chain exchange from Tron TRC-20 to Ethereum ERC-20 for USD1 billion and from Tron TRC-20 to Avalanche ARC-20 for USD20 million.
Hard to Predict the Bottom
While most cryptocurrencies are now at a huge discount, it will be difficult to predict how low the market will fall. Leading altcoins such as XRP, ADA, DOT, and AVAX are very cheap, and many will be tempted to make an entry.
However, traders and investors should exercise caution as there is no telling what the bottom will be. For those familiar with the market cycle, many will agree that most cryptocurrencies are in the proliferation stage. At this stage, people will try to close their positions, which will lead to a permanent sell-off.
Moving forward, the current state is considered uncharted territory, especially for those new to investing in cryptocurrencies. It would be good to look at both fundamental and technical analysis so that someone can come up with a more robust investment strategy.
‘Deep in a New Crypto Winter’
Cardano founder Charles Hoskinson said the so-called "crypto winter" will not have a major negative impact on the cryptocurrency industry.
In the expert's view, it will take weeks or even months for the market to recover from the current unprofitable situation. But first, a stable day needs to be achieved, that is the priority. Then it will take some time to gain strength.
The market crash in May has stalled the institutional adoption of Bitcoin and other digital currencies. Major players have now taken a wait-and-see approach.
The demise of cryptocurrencies has been repeatedly predicted in the past, but Bitcoin and Ethereum are still here in 2022. In these critical times, there are still cryptocurrencies worth keeping an eye on. This is due to their value and unmatched resilience. A better understanding of currencies will give you a better chance of making an informed decision.
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