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Is The Bearish Market Here To Stay?

It is no news that 2022 has not been very kind to the crypto industry. The market had been bearish since the last quarter of 2021, but 2022 came as the knockout punch for this industry. Many reasons are contributing to this seemingly one of the longest crypto winters yet causing devastating consequences for investors.

Many investors are now running out of patience and thinking of selling off all their crypto assets soon. But should you sell your crypto assets already?

It is difficult to answer this question since crypto is a relatively new economic endeavor with limited historical data. As a result, it becomes rather challenging to predict the future of this sphere.

Nonetheless, the crypto market has been through many ups and downs, even in this short period.

So let’s stroll through the crypto market’s past and get a better idea of what the future holds for this industry.

Current State Of The Crypto Sector

There have been a lot of things going on in the world since 2020, with the covid pandemic taking the world to its grips. Consequently, this devastatingly impacted the global economy, be it conventional or the new digitized and decentralized economy. 

But surprisingly, the start of the global pandemic was not that bad for the crypto sector, especially with everyone stuck at home. This triggered a boom in the crypto sector, benefiting both bitcoins and other altcoins such as Dogecoin and Ether. Couple that with unprecedented celebrity endorsement and publicity; you have the perfect recipe for creating a boom in this sector. 

But things did not remain that way, with 2021 exposing the volatile nature of the crypto market. Bitcoin lost about 50% of its valuation between April and July 2021. Thanks to the volatile crypto market, Bitcoin recovered quickly, reaching $70000 before heading toward the current crash. 

As of now, the price of Bitcoin is about $21000, which is significantly less than what it was last year during the same period. Besides that, other altcoins are also suffering, with Ether’s price sitting at around $1650 from a high of over $4600. Similarly, even Dogecoin has lost a significant amount of its valuation, coming down to $0.1299 from a high of $0.65.  

What’s even more bad news is that Coinbase had to lay off thousands of its employees, and DeFi platform Celcius went bankrupt. Given these figures and data, it does not surprise that crypto investors are worried about the safety of their digital assets.

Is The Current Market Condition Normal?

One of the best and easiest ways to understand the future is by evaluating the past and generating valuable insights. The crypto sector has dealt with crypto winters earlier; there is some data we can use there. For example, Grayscale Investments, a leading digital asset fund manager, says the current crypto winter began on the 13th of June, 2022. 

It is difficult to come to terms with this data, given that Bitcoin has already lost 60% of its valuation. But it makes sense when you consider the point triggering the rapid rise of prices before the fall. This allows one to determine when most crypto investors were holding losses from their purchase prices. 

There have been at least two crypto winters earlier. The first cycle began in 2012 and the second in 2019, lasting four years from the peak to decline. Now considering this crypto winter only began in June 2022, it is fair to presume we are here for a more prolonged crypto winter.      

In the case of both the previous winters, there was always a catalyst that triggered the adoption of Bitcoin and similar currencies along with an increase in the interest rates. However, in 2012, the Silk Road rose, paired with the arrival of a new crypto exchange called Mt Gox. These factors made it possible for people to use Bitcoin to make actual purchases, further laying a robust new foundation for a crypto-driven economy. 

Then came 2017 with numerous Initial Coin Offerings (ICO) introducing investors to many new altcoins. Some of these tokens have garnered unmatched popularity giving great returns to early investors. But many unsuccessful assets failed to stand the test of time or were straightforward scams to con people. 

There is no definite answer to when this crypto winter will end. However, if the market follows the same trend as it did earlier, investors will likely need to wait till 2026 to see the next bullish run in this sphere.

Will It Head Towards Recovery? 

The question keeping investors awake is whether the crypto sector will ever recover. Unfortunately, it is difficult to answer this question without fundamentals amongst cryptocurrencies. However, this makes cryptocurrencies so different from the conventional stock market with publicly traded companies. 

A conventional company on the stock market has the means and ways to generate cash flow for its investors. Hence if you are a shareholder in a company, you can earn dividends from the profit the company makes. 

This profit then functions like a value of measure to determine the fundamental value of the company and the industry as a whole. 

Unfortunately, this is not the case with cryptocurrencies which lack a mechanism to generate profits without the involvement of other third parties. This means there is no fundamental to determine or predict the future of cryptocurrency. Almost everything in this sector derives its basis from calculated and educated speculations. 

But then again, the network effect comes into play when something becomes valuable because others consider it valuable. 

Cryptos Will See The Bullish Phase: Stay Invested

The impact of crypto networks is now more pervasive than it has ever been before. Besides retailers, many large firms now share a stake in the crypto sector. 

This makes cryptocurrencies highly valuable with increasing integration with the mainstream financial ecosystem. Thus, it is fair to conclude that the crypto industry is now too big and impactful not to recover from this crypto winter. Therefore, it is better to keep an eye out to evaluate the developments in this sphere and see how and if things change for good.

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