Blog Crypto What Is a Crypto Winter? And Tips to Get Through It

What Is a Crypto Winter? And Tips to Get Through It

date September 15, 2022 time 5 min read 92 views

Few terms strike fear into the hearts of crypto investors quite like the prospect of a “crypto winter.” It’s a time when profits can be hard to come by, and only the strongest projects (and traders) survive. But winter doesn’t last forever—here’s how to endure this tough period.

In the last few months, it’s been increasingly clear that a crypto winter has arrived—prices are way off all-time highs, and most experts don’t expect them to budge much for a while. If you’re a new investor, you may be finding it tough to keep the faith and continue HODLing. Even more experienced traders may find that their diamond hands are shaking.

But what is crypto winter? And more importantly, how should you deal with it to protect your portfolio? We’ll run through everything you need to know, along with our top tips.

What is “crypto winter” ?

Essentially, a crypto winter is a time of depressed crypto prices and a sustained downward trend. We’re talking about more than just a temporary blip on a cryptocurrency’s price chart that corrects itself a few days later—a crypto winter can last for months, or even years. 

As we see price decreases all around, it’s a good time to understand what crypto winter is.
As we see price decreases all around, it’s a good time to understand what crypto winter is. (Source: Unsplash)

Another important thing to note about a crypto winter is that we’re not just talking about a time when a single cryptocurrency does poorly. A true winter will affect just about every asset in the blockchain world, including not just coins but also NFTs and companies related to the crypto space (e.g., Coinbase).

What a crypto winter means for you

It might feel alarming when you see your crypto portfolio drop in value, but crypto winters are largely inevitable. The economy experiences a recession roughly every three-and-a-quarter years, and the stock market frequently goes through bear markets. All of this is a normal part of the boom and bust cycle, which sees asset prices expand for a while and then undergo a period of decline. 

If you look at the historical graph for just about any asset ever, you’re practically guaranteed you’ll see this trend reflected—from real estate to Tesla stocks to gold.

Explaining why this happens is a little harder, and it’s a somewhat more controversial topic. However, it likely has something to do with social contagion. When others feel optimistic about the future and price of an asset, everyone piles in on the hype. Then, when something sparks pessimism and a few people pull out and sell, it has a knock-on effect and makes everyone else scared.

When is the next crypto winter?

Since cryptocurrency market is far newer than something like the stock market, there’s no established definition of what constitutes a crypto winter. So, let’s just use the definition of a recession: A decline in activity lasting more than a few months that’s spread across the market.

According to this, when is the next crypto winter—and has it already started?

Looking at the bitcoin price graph, we can see that the BTC price fell from more than $60,000 in November 2021 to below $50,000 in March 2022, and then to below $30,000 by August 2022. This certainly constitutes “a decline in activity lasting more than a few months.”

When is the next crypto winter? It might be here already.
When is the next crypto winter? It might be here already. (Source: CoinMarketCap)

The same thing has happened across the blockchain world. Almost all cryptocurrency prices have been continuously declining in the second half of 2022, and NFT sales are also struggling.

How to deal with a crypto winter

The way most of us deal with the real winter is simple: We rough it through the cold and difficult times knowing that spring will come around sooner or later. We also know the experience will be a lot easier if we’ve already prepared for the winter by insulating our house and saving up money for heating. 

A crypto winter can be scary, but you can get through it smoothly by following a few simple strategies.
A crypto winter can be scary, but you can get through it smoothly by following a few simple strategies. (Source: Unsplash)

In other words, braving a crypto winter is going to be far smoother if your income and savings aren’t totally reliant on the performance of the crypto market. Diversification proves to be crucial once again.

However, regardless of where you are today, keep the following tips in mind.

Consider buying the dip

Many investors like to refer to dips in the market as a “sale,” assuming that prices have only declined temporarily and will recover again, leaving you with a nice profit.

For instance, if you bought bitcoin during the “dip” in 2018 or 2019, you’d be doing very well for yourself by now—even though we’re currently in a crypto winter.

However, a word of caution—while it’s true that prices have tended to recover from their lows historically, there’s no guarantee this will always happen. When you look at the biggest cryptocurrencies like ethereum and bitcoin, they’ve always managed to recover from their declines so far. But this isn’t the case for every cryptocurrency that has ever existed. Many have sunk into obscurity.

And even for bigger cryptocurrencies, we only have a few years of history to go off, compared to more than a century of the stock market’s existence. It’s therefore harder to say that the market will “always” recover, because there’s no guarantee it always will. But if you believe in the future of cryptocurrencies, you may choose to make that assumption.

Stay calm

If you’re knowledgeable enough about crypto to know which coins you believe have a good future and an experienced enough investor to know you’ll be able to keep your head, buying the dip can be a great approach.

But otherwise, your best bet may be to wait things out so you avoid doing anything stupid.

If you see your portfolio decline day after day, you can lose your nerve easily and end up selling at a loss. This is just about the worst thing you can do during a crypto winter—if you wait things out, there’s a good chance prices will recover.

So, if you can’t trust yourself to keep your cool, you might be better off avoiding checking your portfolio altogether until the crypto winter is over.

Research over impulse

Selling at a loss isn’t advisable if you stick that money in your bank account instead. However, don’t let this put you off from rebalancing your portfolio during the crypto winter. If solana and dogecoin have both declined by a similar amount, it’s fine to sell some of your solana and use it to buy dogecoin.

Just make sure you do your research so you’re making an informed decision about which projects make the best investments. 

Invest in MCT

If the crypto winter hasn’t scared you off and you’d like to try buying the dip, why not take a look at our new native MCT token

It allows you to convert between multiple cryptocurrencies and access all kinds of other financial products, including investing and staking—all with a single coin. This way, you can experiment with different projects and ways to earn.

Perks include:

  • Up to 18% APR from staking
  • 20% more interest from MyConstant investing products 
  • 20% reduction in borrowing fees on MyConstant 
  • 50% discount on NFT fees through MyConstant 
  • 50% discount on crypto swap fees on MyConstant 

It’s now available on PancakeSwap for US users, and everyone else can access it directly through MyConstant
Sounds good? Sign up today to start benefiting.

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