Will the cryptocurrency winter melt in the second half of 2022?

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The cryptocurrency market has had a heady stench this year with signs of lack of liquidity and even bankruptcy. After a phenomenal surge in 2021, Bitcoin (BTC), Ether (ETH) and other major cryptocurrencies began to decline.

The collapse of the $ 2 trillion cryptocurrency market has wiped out the earnings of investors and some of the fundamental cryptocurrencies. For example, the collapse of the Earth (LUNA) is one of the main factors that led to the collapse of the cryptocurrency market. The algorithmic stablecoin lost all its value after the TerraUSD (UST) crash in May.

Another major contributor is centralized financial lender Celsius, which has offered users returns in excess of 18% for depositing their cryptocurrencies. The company stopped customer withdrawals in June.

Market participants call the current turbulence “the winter of cryptocurrencies”. First of all, crypto winter is a term used when the value of cryptocurrencies falls rapidly and sustainably. Prices can remain low for months, with reductions of up to 50-90%. It was an ongoing phase for cryptocurrency investors who wanted to know how long this period of discomfort could last and how to survive the freezing cold of the cryptocurrency markets.

“When winter comes, will spring still be here?”

The current stage could be a challenge for administrators; However, this isn’t the first time the market has experienced such high volatility. Between 2018 and 2020, bitcoin lost almost half of its value, but in November 2021 the currency returned to its all-time high.

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The Fed’s latest monetary policy decision on Wednesday didn’t have a major impact on Bitcoin’s price. The Federal Reserve, which continues to contain stubborn inflation, cut interest rates by 0.75%, the fourth consecutive cut this year alone.

Immediately following the announcement, experts predicted that investors should expect a resumption of volatility this week. At first, sentiment in the cryptocurrency market seemed slightly bearish, although prices showed signs of growth.

Bitcoin was trading above $ 23,000 and Ethereum above $ 1,700 on Tuesday, both up more than 10%.

Edward Moya, Oanda’s senior analyst, told Time:

“The FOMC decision sparked optimism that an end to trouble is on the horizon and triggered a nice surge in risky assets that helped support cryptocurrencies.”

Q3 and Q4 2022: An Ark of Hope for Cryptocurrency Investors?

According to Moya, cryptocurrency investors are watching the prices of Bitcoin, Ethereum and other cryptocurrencies to see if there is a “possible new test of June lows”.

Despite the positive momentum of the previous week, the price is far from the highs recorded in the last year. Looking at the history of cryptocurrency volatility, it’s not clear when the market turmoil will subside.

Some industry insiders predict the second half of the year could be more painful as cryptocurrency companies struggle to service debt and process customer withdrawals.

For example, Tom Loverro, a former Coinbase board member, shared his predictions for cryptocurrency winter in a series of discussions on Twitter. According to him, the current phase could still improve in 2022.

He noted that the pandemic has largely caused the 2020 bear market and that the current cryptocurrency winter has nothing to do with the fall of 2020. He further explained:

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“So these investors will suffer until prices stabilize”

Loverro advises investors to have enough liquidity to get through the next 3036 months. He said that “cryptocurrencies will come back like never before”.

In an interview with FX Empire, Dora Yue, founder of cryptocurrency firm OKEx, said that following this “aggressive cycle of heavy selling and exhaustion,” investors have plenty of reason to remain optimistic. , how:

  • The market is running out of leverage and the use of stablecoin debt has returned to relatively reasonable levels.
  • Asset prices have started to recover from lows, especially for Defi.
  • Primary market valuations are slowly returning to normal.
  • Business models and startups mature as they cross the backbone cycle again.

The start of the third quarter of 2022 would not be pleasant for Bitcoin given the small steps that cryptocurrencies are taking towards recovery. According to FXEmpire, Bitcoin lost more than 57% in the quarter, while Ether fell more than 67% in the same period.

According to Nomura, the Japanese financial services giant, major economies could see a recession “in the next 12 months due to tougher government policies and emerging economies”. Those words left investors cold, expecting ace races in the near future.

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