As Bitcoin Price Dips Further, Worshipers Are Hit by ‘Crypto Winter’ Fears

There are few things scarier for investors than a bear market – unless you’re involved in cryptocurrencies like Bitcoin, in which case a winter is worse.

There are few things scarier for investors than a bear market – unless you’re involved in cryptocurrencies, in which case a winter is worse. The scary term refers to a sharp drop, followed by a drop in trading and months of market slump – a phenomenon that memorably hit the crypto market in 2018. The price of Bitcoin fell more than 80% to $3,100 from late 2017 to December the following year, a period characterized by the boom and bust of initial coin offerings and several major banks abandoning plans to start coin bureaus. cryptocurrency trading. Bitcoin would not reach a new high until December 2020, according to data compiled by Bloomberg.

Memories of 2018 raise fears of a repeat now after the world’s largest cryptocurrency fell 50% from its last high of nearly $69,000 in November. The crypto universe has lost over $1 trillion in market value on the growing belief that the Federal Reserve is about to start scaling back the ultra-loose policy settings that have fueled a boom in risky assets. The pullback touched every corner of the crypto ecosystem, from Bitcoin to memecoins and exchange-listed crypto exchanges. Although the collapse was enough to shake on its own, it raised even greater concern that the pain could linger for several months, according to UBS.

“There’s this question of how to characterize that and probably the closest analogy is 2018, which is this idea of ​​a crypto winter,” James Malcolm, head of FX research at UBS, said over the phone. “It seems like a pretty tough and potentially protracted time and therefore the crypto winter analogy is pretty good. Remember that the crypto winter in 2018 was not limited to the northern hemisphere winter months. It basically dragged on for an entire year – so it was a crypto winter that effectively lasted a year.

Mentions of “crypto winter” and “crypto ice age” flooded social media amid the latest drop. “Gm gm – make sure you stay warm, crypto winter is in full force,” Twitter user @brycent_ posted on Monday, using the crypto shorthand for “hello” to begin his tweet. “Enjoy this #bitcoin winter,” user @mir_btc tweeted over the weekend.

For Antoni Trenchev, co-founder and managing partner of Nexo, there’s a thrill in the air. Bitcoin has already satisfied half of its two-part definition of crypto winter: a sharp drop in price.

“I’m not looking for a replay of the last ‘crypto winter,'” he said. “Undeniably, there are regulatory and macro storms ahead, and another drop to $28,000-$30,000 cannot be ruled out in the current risk climate.”

Read more: Bitcoin’s new low is $30,000 as 50% rout destroys old supports

Unlike the winter of three years ago, investments in the crypto-sphere remain robust, at least for now. In January alone, crypto exchange FTX announced the launch of a $2 billion venture capital fund to target Web3 opportunities, while the Financial Times reported that Andreessen Horowitz was looking to raise 4, $5 billion for crypto funds. Of course, a prolonged recession could dampen enthusiasm for the sector.

Outside of venture capital, companies are also looking to expand into corners of the crypto ecosystem. Filings with the US Patent and Trademark Office show that Walmart Inc. is preparing to create its own cryptocurrency and non-fungible tokens. Meanwhile, GameStop Corp. also plans to launch an NFT marketplace for gamers by the end of the year.

For Budd White of Tacen Inc., this momentum is a sign that the crypto complex is in the midst of a price review, rather than a freeze.

“I don’t believe we’re entering a crypto winter as there’s still growing momentum on the build side – we’re just seeing more realistic pricing of what’s currently being built,” said White, Chief Product and Co. -founder of the software development company that creates blockchain-based open source software.

The imminent threat of intensified regulatory action adds to the risks inherent in the crypto complex. The Fed is considering the launch of its own digital currency, while the energy consumption of crypto mining has caught the attention of the United States Congress and foreign governments.

“The White House may soon unveil some national security challenges posed by cryptocurrencies and the Fed’s paper on central bank digital currencies did not answer any questions about whether we will see a digital dollar or how they might work with stablecoins,” said Edward Moya, a senior market analyst at Oanda Corp. “The regulatory environment has become much cloudier now.”

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