When will Crypto Winter 2022 end?
Institutional (for example, pension and hedge funds, insurance companies, etc.) invested in markets with a high degree of risk, primarily stock and cryptocurrency. Not surprisingly, both almost simultaneously (with a difference of only one month) reached new record levels.
But already in December 2021, almost all developed economies faced the fact of a significant increase in inflation. For example, in the United States it was 7% in annual terms, which was the first such case since 1982. This situation developed due to many factors, but it became clear that it would not be possible to bring it back under control without tightening the policy of central banks.
It was against this background that the sale of cryptocurrency and stock market assets began. This was followed by the cancellation of quantitative easing programs and the beginning of a cycle of Fed rate hikes, the risk appetite of investors became even less. The crypto market also showed its own negative. The collapse of the UST stablecoin and the Luna token of the Terra project. They led to sales of other digital assets as well. All this forced the crypto market to drop to local lows.
The continued uncertainty in the market also has its reasons:
With the depreciation of rates, the profitability of mining has fallen sharply. As a result, pools, private miners and companies that have accumulated significant amounts of cryptocurrencies do not bring them to the market, expecting more favorable prices.
The problems of stablecoins have led to a loss of trust in them. As a result, the number of investors who previously invested in these assets decreased by almost 40%.
Major players, if they gain positions, tend to do it as carefully as possible, fearing that they will not receive better prices in the foreseeable future.
Rate hikes by central banks and relatively high inflation continue to dampen investors willingness to take risks. In addition, although analysts believe that in August 2022 the risk of a recession in developed countries and in the global economy has significantly decreased, they are not in a hurry to reject the possibility of its onset. As a result, demand for defensive assets and commodities, cash is growing, while interest in high risk instruments remains at a fairly low level.
The question of how long the crypto winter will last worries both existing investors in the digital asset market and those who are just about to buy them today. Experts do not yet have a clear answer.
Some are trying to predict the end of crypto winter 2022 based on historical market data. This is what Grayscale Investments did, for example, after conducting a thorough analysis of the previous two similar seasons. According to their estimates, the end of the current one should be expected by mid-March 2023. They made such a conclusion based on the observation of an almost unchanged cycle of bitcoin quotes movement, which takes about four years (1290 and 1275 days before reaching the next bottom of quotes in previous cycles, 1198 in the current one, if we take the June level in 2022 as a cycle minimum). In this case, after a slight correction (which is now observed), it takes about 6-7 months for a slight decrease or lateral movement in the price of the first cryptocurrency, which sets the cyclical nature of the entire market.
Important! All market participants know that historical data is not a guarantee of similar results in the future. Therefore, although the Grayscale analysis looks solid, the performance of the forecast is not guaranteed.
Supporters of one of the alternative points of view say that the completion of the crypto winter should be expected as early as the fourth quarter of 2022. They operate on the results of technical analysis, claiming that the market bottom was passed in June, and the correction from last year's highs is completed. In this case, it is quite possible that by the end of the year, cryptocurrencies will complete the bearish trend and start storming new historical highs. In confirmation, they cite the altseason index, which has already shown a reversal and even reached the upper threshold values. Bitcoin repeats this movement with some delay, so in the next 1-2 months, enthusiasts are waiting for it to take off.
Another scenario is based on the high correlation between the price of the first cryptocurrency and the US stock market (S&P 500 and NASDAQ 100 indices). Its adherents say that the continuation of the cycle of raising rates in the US is inevitable, which will cause a continued decline in stock indices and, accordingly, BTC. From their point of view, the bottom of the market has not yet been passed, and the minimum of bitcoin quotes is expected to be around $10,000 per coin. Further development of events will depend on whether the US economy will slide into recession. To complete the crypto-winter-2022, they allocate from 9 to 18 months from the moment the BTC quotes update the lows.
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