The views of this article are the perspective of the author and may not be reflective of Confessions of the Professions.
There is currently a lot of speculation in the cryptocurrency realm that a ‘crypto winter’ is on its way. But what would this mean for the market and investors?
Andras Ivan, analyst from international broker comparison site BrokerChooser commented:
“The current downturn of the crypto market has seen Bitcoin plunge down 50% from a record high in November and the entire crypto market shed over $1 trillion in the past three months leaving investors reeling. Some fear the worst is yet to come with a possible ‘crypto winter’ making the rounds again.
A crypto winter refers to a downward trend in the market that has longevity. It is often associated with the crypto winter of late 2017 which saw Bitcoin plunge more than 84% from its then all time high. The vast majority of other coins plummeted in unison and the crypto markets didn’t show signs of recovery until mid-2019.
With it being more that 75 days since Bitcoin fell from it’s all time high $68,990 some believe the crypto winter has already hit. However the slump seems to be more of a ‘correction’ than a downturn. Bitcoin would need to bottom out at around $11,000 to reflect that of the previous winter percentage loss which seems unlikely to happen.
Even though the current crypto trend looks bearish, we have to take in consideration that the structure of crypto investments is quite different now compared to the previous peaks at the end of 2017. The market cap is significantly higher now and institutional investors joined in the past 1-2 years. That might help the market to avoid such serious drops and disappearing interest that we experienced in the crypto winter of 2018-2019.
Of course, we can’t know for certain whether crypto winter Ⅱ is here or on its way but there are some things we can do to prepare.
1. Don’t panic
It can often be the hardest part of investing, but keeping your emotions intact during a bear market is an important step. Always make sure to have a concrete plan in order to avoid making snap decisions in an incredible volatile market. You can only manage what’s in your control and not panic about what’s outside of it.
2. Assess your crypto holdings
Looking at the crypto you have and why you have it is the best way to stick to an investment through good and bad times.
3. Evaluate potential scenarios
Mapping out what you would do if your crypto portfolio fell by 10%, 20% or 50% will help you feel more in control and help you make a more calculated decision.