EXPLAINED | Crypto Winter: What Is It? How Is It Connected To 'Game Of Thrones'? Does It Have Any Advantages?

Bitcoin price dropped below $18,000, marking a massive plunge of over 70 percent from its all-time high of $68,000, as seen in November 2021.

The last crypto winter lasted for about two years, from January 2018 to December 2020. ( Image Source :Getty )

In May, the ‘de-pegging’ of the TerraUSD stablecoin led to an unprecedented bloodbath in the overall crypto market. The Terra (LUNA) cryptocurrency saw a dip of around 97 percent below its all-time peak of $118. This led to a wipeout of $60 billion in investors’ wealth. In June, Bitcoin (BTC), the world’s oldest and most value cryptocurrency, dropped below $18,000, marking a massive plunge of over 70 percent from its all-time high of $68,000, as seen in November 2021. The overall crypto market value dropped below $850 billion, dipping from over $3 trillion in November 2021.

The ongoing crypto crash has led to many experts claiming that the “Crypto Winter” is finally here. What is crypto winter? What does the term mean exactly? Does it only have disadvantages, or does it offer a glimmer of hope for investors? Read on to find out.

Crypto Winter: What is it?

While there is no hard proof of how the term was coined, several publications, including Forbes, surmise that it may have come from the multiple Emmy-winning HBO series “Game of Thrones” and its now-iconic motto, “Winter is Coming.” While the show used it to warn that days of conflict and gloom will descend upon the fictional land of Westeros, for crypto enthusiasts, “crypto winter” signifies a period of time when crypto prices dip and stay in the red for a considerably extended spell.

If we consider it literally, crypto winter sees a ‘cooling down’ of crypto prices. The crypto winter will only be over when prices will see a gain, or ‘heat up.’

Apart from the de-pegging of TerraUSD, analysts say that the ongoing Russia-Ukraine conflict and the rising interest rates caused due to high inflation in the US are also to blame for the current crypto winter.

Crypto Winter: When will it be over?

There are no definite indicators that can help ascertain when a crypto winter period will exactly be over. 

However, if we look at historic trends, this isn’t the first time the market has seen a crypto winter. And it’s safe to speculate that the crypto winter will be over at some point of time, when the crypto market will stabilise again. The last crypto winter lasted for about two years, from January 2018 to December 2020, when Bitcoin lost over half of its market cap, as per Forbes. 

Edul Patel, the CEO and Co-Founder of crypto trading platform Mudrex, said, “We have seen many Bitcoin corrections since 2011, but Bitcoin has returned strongly. It has been historically observed that bear markets are usually quick to plunge and never last long.”
He added, “It is just a matter of time that may require a price bounce. The current bearish market may likely continue for the next few weeks as it has still not recovered from the previous month's correction.”

Crypto Winter: Does it have any advantages?

The concept of crypto winter doesn’t leave much room for positive outcomes. The harsher side of the crypto winter is already being seen among several crypto platforms which are laying off hundreds of employees to cut costs. Popular firms, such as Coinbase, Crypto.com, and BlockFi have laid off a considerable number of employees as part of their restructuring.

However, every cloud has a silver lining, and the crypto winter too has some positive outcomes. As per Forbes, a crypto winter acts just like a conventional bear market. It helps sincere firms to prove their products and weed out young startups in the process. 

Importantly, when a crypto winter is over, it can result in a long-term period of reliable growth in terms of crypto prices, as was seen in the case of the last crypto winter in 2020. 

Crypto Winter: What should investors do?

Given the current scenario, Patel advises that investors "looking towards stocking up on cryptos can DCA.” For those unaware, DCA, or dollar-cost averaging, is a long-term strategy that can help reduce the impact of market volatility by investing smaller amounts into an asset on a regular basis. There’s no fixed schedule for DCA. It can last for some months or even a few years, depending on the investors’ goals.

“At the same time, others should closely monitor the market movements rather than jumping into impulsive buying activities,” Patel cautioned.