Binance released its highly anticipated proof of reserves (PoR) on Friday, providing blockchain-based evidence for the Bitcoin on its books. However, many in the crypto community question Binance’s approach, and aren’t fully convinced that they have the transparency they’re looking for. The Move to Proof of Reserves As Binance explained in its announcement, the exchange’s transparency system will add multiple tokens and networks within the next two weeks. For now, it solely validates its Bitcoin holdings. The company’s initial audit…
In 2013, BTC investors had a perfect reason to panic as they saw the flagship crypto fall about 80% down. After the crypto’s price plunged, enthusiasts had to wait until 2020 to regain its previous highs. Thus, many could say that until 2018, the digital currency market was experiencing a crypto winter.
Crypto Winter refers to a period whereby the prices of Bitcoin and other digital assets remain at low levels after a price crash occurs for long periods.
Some individuals and organizations interested in the so-called exciting new technology are skeptical towards blockchain. Yet, others are still trying to make sense of this crypto tragedy. Therefore, Crypto winter is not a hindrance to participating in blockchain to clear the cold air.
This guide will take you by the hand through what crypto winter is, its prospects, and how to best cope during this period. So read on.
Crypto Winter Explained
The word “Winter” refers to “cold” or “missing hotness” in assets or stocks and currencies. It implies a collapsed price of any asset, product, or cash. Compared to “Hot,” this means that interest in any subject has declined. The decline is to the point that prices appear to freeze in time.
In 2021, Bitcoin reached an all-time $64,863 high in April. It rose from $5,000 in March to the said price in 2020. However, it later dropped to as low as 29,002 before settling at 32,212. These sell-offs may appear severe, although they are not the worst in Bitcoin’s 12-year history.
Since its inception in 2012, Bitcoin has endured 14 sell-offs above 14%. Six of them were more than 50%, and three were above 80%. The worst of these sell-offs preceded extended periods of flat trading. This cycle is what is presently referred to as “crypto winter.”
Are We Headed into Crypto Winter 2.0?
Recent occurrences in three major crypto countries – India, China, and the USA- indicate a possible start of the second crypto winter.
During the first crypto winter, rumors about South Korea’s possible ban on crypto initiated the freeze. Additionally, Japan’s largest crypto OTC market got hacked, and things were already snowballing by then. In the same year, compromised Binance API keys were misused. Then Google, Facebook, and Twitter banned any advertisements of token sales and ICOs.
Crypto Winter 2.0 may have started in May when Ether plunged by 40%, Doge 45%, and Bitcoin 30%. It could exhibit a similarity to many factors, such as tweets from Elon Musk.
Moreover, it is in addition to an anti-crypto statement from the People’s Bank of China. Therefore, the start of regulatory activities against Binance may also be a factor.
Commercial banks have refrained from dealing with crypto exchanges in India after an informal directive from the Reserve Bank of India.
Additionally, the Securities and Exchange Commission has cautioned against Bitcoin futures in the US. The Office of the Comptroller of the Currency is also reviewing all previous crypto bank actions.
Currently, crypto markets are much bigger, and the downfall could have a more devastating impact on the community. It includes all whales, sharks, minnows, and all various sea creatures.
Therefore, we are likely to face a long haul before we get back to the highs of this year. However, even if the conditions are different, Crypto Winter 1.0 shows that a quieter period in markets may ironically boost the development of the technology. A lot of significant development occurred from 2018 to 2019. It nurtured projects that were integral to crypto’s ecosystem.
Similar design works are essential to enhance privacy while addressing identity issues, reducing transaction costs, and scaling while optimizing decentralization. Moreover, we require a different type of advancement: that of relationships with large companies, governments, and the masses at large.
The Adoption Challenge
Some individuals perceive cryptocurrency exclusively as a tool of the rich. Others say it’s a tool for the privileged to hide their assets from the prying hands of the state. However, that is not the case because crypto technology is a public development that can succeed with mass adoption.
Sadly, the public’s trust and acceptance of the innovative technology is somewhat currently in jeopardy. That is because many equate crypto with scams, losses, and bubbles.
To be sure, this price correction may imitate the previous one, which followed the late 2013 bubble. Then, it was a two-year interruption followed by a revival rally in 2016. This rally boosted crypto values in 2017. However, the downturn in 2018 is a more significant blow to public confidence in blockchain than that of 2014.
The crypto winter is not precisely about price decline per se. It’s also about the mainstream, which was finally starting to understand crypto, but they now have second thoughts. Crypto enthusiasts may not outright admit it, but they long for acceptance, perhaps more than adoption.
This shift from mainstream backing to mainstream disapproval echos the initial coin offering bubble. The bubble left novice traders disillusioned with that era’s crypto assurance of easy token riches.
Bitcoin is currently down by about 75% from its highs and 80% lower from its market cap. Such a violent meltdown will cause a significant loss of confidence in the sector.
Government regulators may take a more conservative view of the technology and, likely, a more complex line regulating it. For crypto startups, this may exclude them more from the markets.
Sadly, the crypto winter is already here. There is a need for more than just a sleeves-rolled-up approach to technical development. Community leaders and social media influencers also have a responsibility to change the message.
Many economics experts have made predictions about the rupture of a speculative bubble in cryptos. What follows is a crypto winter. The Crypto Winter may be looming. However, perhaps it’s the necessary tool cryptocurrencies need for sustainability and growth in the future.
People are not in it for just for a speculative run any longer. Instead, they want to get in it because they count on crypto growth and development.