Cryptocurrencies and other digital assets have been crashing — and it feels like there’s no end in sight. Some have suggested that we’re experiencing a crypto winter.
While the idea that your crypto assets are struggling might not feel good, you might be surprised that there are benefits to crypto winter. Let’s take a look at what crypto winter means — and how it might help you.
What is Crypto Winter?
Basically, crypto winter is an extended downturn. Crypto assets are down and expected to remain down for a period of months. Experts differ on how long the current crypto winter will last. Some say that crypto assets will begin turning by the end of 2022. Others believe that this downturn period could extend well into 2023.
Some of the indications that we’re in crypto winter include:
- Large crash in crypto assets (including NFTs).
- An extended downturn of blue chip cryptocurrencies like Bitcoin and Ethereum.
- Chatter about Web3 is receding.
- Developers leaving crypto projects.
- Extra hype around some projects — without delivery of promises.
- Refusal of companies like Voyager and Celsius to honor customers.
- Concerns about bankruptcy by major exchanges.
Potential Benefits of Crypto Winter
While it looks bleak, there are some potential benefits to the current downturn. You might have access to opportunities. Additionally, we could see the survival of the fittest.
Whittle Away the Dead Wood
There are more than 20,000 cryptocurrencies out there. Trying to figure out which are legitimate can be a daunting task. Many coins are simply money grabs by developers. Crypto winter, on the other hand, has the potential to whittle away dead wood.
Some experts expect only the strong to survive. To get through the current downturn, crypto projects need to be strong. They must have a strong use case and solve a problem. Additionally, they should have an active developer community.
Crypto projects that emerge on the other side of this storm are likely to have a better chance of long-term survival and provide value.
Opportunities to Buy Low Now
Crypto winter also provides you the chance to get access to projects at a lower price. You might not have been able to buy into Ethereum when it was above $4,000. But not that it’s below $1,500, but you might decide it’s a good time to get a little — especially if you think the coming upgrade will benefit.
Next, you might identify up-and-coming projects that could provide value later. With everything down, you could get in on the bottom floor. Some so-called Ethereum killers are at bargain-basement prices right now. You might be able to load up on coins and sell them later.
Any asset crash — whether it’s in stocks, cryptocurrencies or NFTs — offers a chance for you to find good value.
Learn about Crypto Assets without the Hype
When everyone is buying, and prices are through the roof, it’s hard to take a step back and learn about assets. Crypto winter gives you the chance to take a breather. Take some time to learn about crypto assets and different projects. Think about where crypto fits into your portfolio. Now is a good time to decide whether you even want to add cryptocurrencies or NFTs to your portfolio. You can also decide if this metaverse thing is even something you want to invest in.
Every asset needs a breather, and it’s natural for periodic downturns. Much of the hype disappears when this happens, and you are less bombarded by irrational exuberance. You have the chance to educate yourself and make better financial decisions.
Should You Invest in Crypto Now?
The real question is whether you should invest in crypto now. The market could go lower. Will you miss out if you get in before the “real” bottom? Or should you just get something while it’s relatively inexpensive and you don’t have to worry about trying to perfectly time the market?
Carefully consider your own situation and goals. Also, be careful about how much you invest in crypto. Even if you decide crypto winter is a good time to buy assets, you still need to be wary. There’s no guarantee that crypto assets will actually make a comeback and become viable long-term.
Review your portfolio strategy and financial goals to get a feel for what makes sense for you. Investing in crypto can be a way to catch a rising wave — but you could also lose the money you invest if Web3 and crypto don’t reach mainstream adoption. Don’t risk more than you can afford to lose, and make sure your portfolio is appropriately diversified so your future isn’t at risk if crypto never takes off.