Know the Crypto Winter Phenomenon and Its Impact
In the world of cryptocurrencies or cryptocurrencies, a phenomenon called “Crypto Winter” is currently happening. This phenomenon is suspected to hurt the ecosystem of the cryptocurrency industry. So, what is Crypto Winter? For more details, see the following 20info.com review regarding Crypto Winter and its impact on the industry.
What is Crypto Winter and how did it happen?
Crypto Winter is a term for the phenomenon of a drastic and prolonged fall in the price or value of cryptocurrencies in the market. It should be noted that several cryptocurrencies, which are quite dominant in the market, are currently falling in price. For example, as prices of Bitcoin (BTC) and Ethereum (ETH). Based on our observations on the Coin Market Cap site, the price of BTC has fallen by 53.73 percent over the last three months.
The term Crypto Winter itself has been used since early 2018, to mark the decline in the value of Bitcoin in the market by more than 80 percent. In 2017, Bitcoin reached its highest price level at almost 19,500 US dollars. Entering 2018, the price of bitcoin fell to around 3,300 US dollars. Crypto Winter at that time lasted from January 2018 to December 2020. After that, the price of cryptocurrencies gradually recovered. The peak was in November 2021, the price of 1 Bitcoin coin was at the level of 68,990 US dollars.
However, the strengthening of the value of the cryptocurrency did not last long. The value of several cryptocurrencies, including Bitcoin and Ethereum, has continued to decline by up to 70 percent, in the last seven months from November 2021. The phenomenon of the decline in the value of cryptocurrencies for months is then also indicated as Crypto Winters, similar to what happened in 2018. Speculation of the occurrence of Crypto Winter volume two emerged a few months ago.
Quoted from the Forbes page, Crypto Winter is generally caused when there is a massive sale of cryptocurrency from the highest price. In addition, the decline in the price of cryptocurrencies also arises due to negative sentiment from the market. The negative sentiment arose from several phenomena, such as the decline in the value of the LUNA cryptocurrency by more than 90 percent in the last month of May.
Then, negative sentiment on the cryptocurrency market was also caused by the suspension or freezing of crypto transactions from the Celsius Network cryptocurrency banking platform. The action prevented users from withdrawing cryptocurrencies stored on the Celsius Network. The freeze said Celsius Network aims to stabilize the crypto exchange (liquidity) and its operations.
Along with the announcement of the transaction freeze, the price of the Celsius Network (CEL) cryptocurrency itself has also fallen by more than 90 percent in the past year. It is this volatility of the crypto market that makes or encourages investors to sell their assets, giving rise to the Crypto Winter. With the Crypto Winter phenomenon, there are several quite bad impacts on the cryptocurrency industry today, here is an explanation.
Impact of Crypto Winter
In the view of William Luther, a professor of economics at Florida Atlantic University, this kind of Crypto Winter phenomenon is considered normal in cryptocurrency trading.
Luther reminded investors to stay calm and keep their eyes on the long term. Losses due to the decline in the value of cryptocurrencies are said to be only a momentary phenomenon. “Judging from experience, there tend to be these ups and downs in the crypto market,” Luther told CNBC. Luther said that the Crypto Winter phenomenon could serve as a reminder for investors to be careful in investing, especially in industries that are prone to ups and downs.
Amid the current loss in cryptocurrency investment, Luther advised investors to be able to allocate their assets to several sectors such as stocks and bonds, not just cryptocurrencies. So that when the value of one asset is falling, for example, cryptocurrency, investors do not experience full losses because they have been diversified by holding other assets.
Crypto Winter’s impact on investors’ losses today, seems to have become common knowledge. In addition to investors, Crypto Winter also hurts those who work or are employees of crypto transaction service providers. In the middle of the Crypto Winter, investors tend to stop or reduce their crypto trading activities.
Thus, the revenue of companies with crypto transaction services will also decrease. This condition finally forced the company to reduce the cost of producing services, one of which was by reducing or firing employees. Coinbase, one of the companies with cryptocurrency digital wallet services, is rumored to be sacked as much as 18 percent of the total employees with full-time status. For now, Coinbase has a total of 5,000 full-time employees. With that percentage, it means that 1,100 full-time employees will be fired from Coinbase.
Coinbase CEO Brian Armstrong told CNBC that a recession would likely occur after more than 10 years of an economic boom. A recession is said to trigger the next Crypto Winter. To prepare for the recession and the Crypto Winter, Coinbase made efficiencies in the company’s operations, including by laying off thousands of employees. So, when will Crypto Winter end? Armstrong then also explained that the end of the Crypto Winter is still unpredictable or difficult to predict. Most likely Crypto Winter can run for quite a long time.