Different cryptocurrency seasons: The impact of the crypto winter
Byline | Becky Moore
You might have heard of crypto winter, crypto spring, and crypto summer. The different “crypto seasons” represent what the market is doing over an extended period of time and what season it is has an impact on investment and trading volume in the industry.
Bitcoin, as both the original AND the largest cryptocurrency, has a massive influence on the cryptocurrency market overall. Alternative coins in the market, referred to as altcoins, often follow Bitcoin’s major movements. This means that a major surge or dip for Bitcoin is often met in kind by the leading altcoins.
What causes the crypto winter?
Bitcoin, and the cryptocurrency market, is known for its volatility. The price range is especially aggressive when the market is turning from a peak to a bear rally or from an extended dip in value to an increase.
This volatility can cause cautious investors to sell-off, especially when there are other macroeconomic factors that are impacting the global markets.
Historically, since Bitcoin was launched, the crypto winter is part of a cyclical market trend. Every time there has been a bear run in the crypto market, there have been external factors that have caused the price of Bitcoin to fall. For example, the first crash that Bitcoin faced was following the hack of the only major cryptocurrency exchange at the time (the attack on Mt Gox). Over the course of 24 hours, Bitcoin lost 99% of its trading value and was sent into the first crypto winter.
The impact of the Bitcoin halving on the market
In addition to external macroeconomic factors, the event of the Bitcoin halving has an impact on the market. Every four years (approximately), the reward that Bitcoin miners get for minting Bitcoin is halved – a programmed feature in Bitcoin’s blockchain to ensure the circulation of Bitcoin is sustainable with the supply and demand of the cryptocurrency.
The market tends to correct some time after a halving, because the price rises just after the event with the increased scarcity in how much Bitcoin is being created. After the initial increase, investors often sell their coins for profit, causing the market to fall – and it tends to overcorrect. This results in shorter-term investors selling out of fear, which sends the price of Bitcoin lower.
Will Bitcoin come out of crypto winter?
Looking at trends in the past, the crypto winter is just a phase in the life of the market. Like economics, which have recessions and expansion, the crypto summer and crypto winter is part of the way the market moves.
“New investors might see the crypto winter, especially an extended downturn, as the death of the market. However, looking at the past ten years of Bitcoin, the crypto winter has always come to an end, with new projects and ideas emerging when the crypto spring brings in fresh investment”, according to developers of the Bit Index AI software. Not only has Bitcoin always come out of a crypto winter, but it has also always risen higher than previous records when it peaks.
Should you buy Bitcoin during a dip?
Buying Bitcoin during a crypto winter, when the market seems to be making no upward movement, might seem daunting. Many traders prefer to buy cryptocurrency when it is low and hold on to it to sell when the price rises again: “Buy low, sell high”.
Whether you want to buy Bitcoin during a crypto winter depends on your risk appetite and liquidity. Taking time during the seasonal dip to learn about the market and gain experience in trading often comes in handy when the markets start to turn upwards. Getting to grips with active trading can give you the edge when the market tends towards the crypto spring and summer seasons.
