The crypto market experienced one of its biggest drops in recent history. What caused it and how long is it expected to last?
If you've watched the TV series Game of Thrones, the phrase "Winter is Coming" will sound familiar to you. The crypto market is currently experiencing a "crypto winter", where the prices of cryptocurrencies have contracted and remained low for an extended period.
According to reports, the crypto market's overall value fell 60 percent, or US$1.7 trillion, in the last three months. At the time of writing, Bitcoin, the world's first decentralised cryptocurrency, is trading at around US$20,000 per coin. That is a far cry from its high of US$68,990 per coin price in November 2021. Ethereum, the world's second-largest cryptocurrency by market value, has also taken a beating, trading at US$1,084, dropping from a historic high of US$4,600 last November.
What caused this considerable fallout affecting the crypto world? We speak to cryptocurrency price terminal DefiDive's founder and CEO Joe Lee to understand this tumultuous period.
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How bad is the crypto winter?
This isn't the first crypto winter to happen. Having been invested since the early days of Bitcoin, Lee says that there have been five crypto winters since the start of cryptocurrency. The last one lasted from January 2018 to December 2020, and was followed by a period of incredible growth in 2021.
"Honestly, this crypto winter is not as bad as it is said to be. If you look at tech stocks in the US, such as Netflix and Meta, they were also on the downtrend and indicated that the market was going to slow down," says Lee.
External factors like the war in Ukraine, inflation and raised interest rates also contributed to the current crypto winter. In response, investors are offloading their riskier investments, such as cryptocurrencies, in favour of more stable assets.
According to Lee, the crypto winter is similar to a conventional bear market on the stock market, where prices decline 20 percent or more from recent highs. "People who bought into cryptocurrency in the last 12 months will feel burnt by this crypto winter. People must understand that crypto is a very high-risk asset with great potential for huge returns, but it also carries great risk."
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