What is a "Crypto Winter"?
And why does it matter?
You might have seen this term getting bandied about in the last few weeks, particularly in the last couple of days.
Crypto winter is here, and everyone is battening down the hatches.
Add in the bearish price action, and you feel it. The winds of crypto winter are beginning to blow.
If the analysts are right, and we’re at the start of it, then expect things to get frosty quickly. A crypto winter is more than just a bear market—a crypto winter means a period of prolonged downturn, weak price action, and multiple collapsed altcoins as investors flee to Bitcoin or leave the investments altogether.
The last crypto winter lasted from approximately 2018-2020.
Think back to that time—a time before $4 ($5!) gasoline and baby formula shortages, back to those heady days before COVID-19 shocked the world and people judged others on their vaccine status. It was a different era. We didn’t know what we had, and we certainly didn’t know what was coming.
(I’m talking about investments here, not broader society. 2018-2020 was certainly hard for many people, and this is not meant to minimize any of those legitimate concerns or issues.)
This roughly two year period was also a time when most other assets outside of cryptocurrency were doing quite well. Investors were happy with their 401K returns and real estate positions. The labor market was good. Inflation was low. Sure, the federal reserve did some quantitative tightening, and the stock marked pulled back for a bit, but think about it… did you hear about crypto at all back then?
I sure didn’t—not in terms of serious conversation.
I vaguely remember hearing about two Facebook millionaires turned Olympians who made a fortune in magic internet money. CNBC logged Bitcoin’s price on the asset ticker right along with the Dow and the NASDAQ, but it was all mostly a joke. Nobody serious was buying any. The only people willing to touch the stuff were crazy.
During that time, prices turned to the downside and stayed down. Innovation fell away. Investors lost their resolve alongside their money. It was like a bear market times a hundred.
And we all know what happened in 2020 and 2021. Crypto came back big time.
So here we are again—down only, a chill in the air, people leaving. I even see it in my daily conversations. Last week I sat at a banquet table with a couple I barely know. Another guest mentioned this newsletter, and the husband launched into a diatribe that basically dismissed Bitcoin out of hand. He knew all about El Salvador and wanted to tell me his opinion, but he summed up his thoughts as dessert was served.
“It’s a dead asset class,” he told me. “And that president of theirs is insane to put his country on a Bitcoin standard. It’s not going to last.”
I think he’s wrong.
After I left the event, I opened my Strike app and bought some more Bitcoin in the elevator. Why? Because there is only going to to ever be 21 million Bitcoin, and I wanted to make sure there’s less for that that guy to get when he finally comes around.
But not yet. No, not yet at all.
Crypto winter is going to test your resolve in a way you’ve probably never been tested. It’s going to make you examine your fundamentals, and make you question why you got into this in the first place. That always happens in a bear market, but crypto winter is going to amplify those feelings.
Get ready.
Are you willing to hold your crypto for years with no return on investment? Are you willing to invest with no expectation of upside? Do you really believe in an alternative currency? Are you truly frustrated with the fed, the money printing, and the centralization that comes with modern economies? Do you think digital assets have purpose?
You’re going to have to answer those questions again and again during crypto winter, and you might have to do it after losing a significant amount of your investment.
That’s what crypto winter is all about. Tests. Repeated tests. You’re going to have to pass them all.
Are you ready?
The Crypto Connection is for entertainment purposes only and is not meant to be financial advice. Please do your own research before investing in any asset class. Sara Celi is not a financial advisor, and holds several cryptocurrencies. To purchase her books on Amazon, please click here.