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What is Crypto Winter

Understanding the realities of a crypto winter

In reality, cryptocurrency and its emergence are synonymous with human existence where it has ups and downs moments that can be tied to seasons.

by James Enajite
July 25, 2022
in Global
Reading Time: 4 mins read
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The transformation of life in general and any ecosystem can be described as having phases or seasons of life. There could be a season for heat, tending to help different plant species and insects alike to come out in their full population for mating and breeding. 

The same is true for the cold season, or winter season when animals of all types tend to go into hibernation and conserve their body heat to stay alive. Meanwhile, all types of plants tend to shed their leaves as the freezing temperatures make them dry up and fall off the trees uncontrollably till the trees look bare and completely naked without leaves.

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Is crypto downturn synonymous with winter?

In the blockchain technology and cryptocurrency space, there are usually two seasons associated with the market. A “crypto winter” basically implies that market prices have dropped a long way for all cryptocurrencies and they are perceived to have stayed below their major support levels for weeks or months. 

This season is attributed to the bear market where it is assumed that the bears (market sellers) are out to sell everything against the bulls’ movement of price action.

What are the characteristics of a Crypto winter?

The crypto winter like traditional seasons is attributed to the following characteristics.

  1. More selling pressure (Bear pressure): It is observed that there is an increase in selling pressure in the price of cryptocurrencies, where the sellers are more than the buyers and this tends to give a perspective of the buyers (bulls) being slaughtered in the markets and losing their momentum.
  1. There is a dip in prices: Most traders are excited whenever the price of cryptocurrencies tends to move upwards and the same excitement gives them the courage to invite their friends and associates to foray into the market. However, the reverse is the case for the crypto winter as most people tend to lose confidence in speaking about crypto projects to new potential buyers or investors as they are perceived to be losers who have lost their money in the downturns of events in the market.
  1. Announcement of Job losses: there is a great potential for the downsizing of workers in the crypto industry as there is a high level of losses in income that is experienced by the companies and, as such, the need to shed some staff or workforce can be synonymous to the leaves on the tree as earlier described.
  1. Increase in exit scams and declaration of bankruptcy: There is indeed a high potential of possible exit scams with companies and projects filing for bankruptcy as a result of the increase of sell pressure coming from the bears, which seems to affect the business of the trading companies or exchanges as the case may be.

How should traders react in crypto winter?

  1. Overcome fear: Most trading platforms are of the opinion that traders should always trade with funds they are comfortable with and can afford to lose – though these are not financial advice as every individual trader is responsible for their trades on the trading platform. If such a trader has taken a proper risk assessment, they would not be overcome by fear and would apportion a calculated risk for their trades. This would avert the possibility of panic due to fear.
  1. Ability to take profits during a bull market: A good trader who understands that markets are cyclical in nature would know when to take profits off the table in a bullish trend in order to avert a heavy loss in the bear market in a dollar-cost averaging strategy. This has proven to be a very strategic method applied by good traders. 
  1. Avoiding selling at a loss: As a result of anxiety on the part of traders who see the value of the positions in the markets depreciating, they are always on the lookout for the possibility of selling at a loss, which is always detrimental to their position in the market. 

Knowing fully well that all markets are cyclical and would always return to their previous all-time high price value is crucial. It is suggested that if you’re a beginning investor, it might be ​​best to buy and hold as you await the reversal cycle.

In conclusion, the crypto winter is not a death sentence to any project, especially solid projects with solid vision and massive use cases built on a daily basis, such as the Klever ecosystem. 

Therefore, holding Klever tokens sounds like an interesting choice, giving users the opportunity to stake and get rewarded for staking even during the crypto winter.

It is indeed a Klever thing to do.

Tags: crypto bear marketcrypto bearscrypto winterunderstanding crypto winter
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James Enajite

James Enajite

A passionate lover of crypto and mankind with an active mind to create content to educate everyone within my sphere of influence. An entrepreneur with an open heart to accommodate young aspiring individuals to achieve their best in a global space.

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