Is crypto winter here?

Dramatic sales of digital coins, in which Bitcoin fell below $ 34,000 and erased more than $ 1.4 trillion in total cryptocurrency value since November, have worried investors that the worst is yet to come. There are stories of a “cryptocurrency” on the move, referring to historic bear markets in the digital currency area.

The last time this happened was in 2017. at the end of 2018. At the beginning of the year, after an unprecedented boom, Bitcoin fell more than 80% to $ 3,100 and did not reach a new high until 2020. in December. This so-called big “cryptocrash” was worse than the 78% collapse of the Dot-com bubble in 2000. in March.

Data from the analytical company Glassnode and the trading package Decentrader show that more and more bitcoin was sold cheaper than it was bought in January.

Bear market components

The first sign that crypt winter is here is the bear market. A bear market arrives when crypt prices fall by at least 20 percent over a constant period of time – usually at least two months. Current data correspond to the existence of a bear market – a permanent decline in value of at least a fifth over a longer period of time.

Other common factors in the bear market are the poor mood of investors and the general bad feeling in the economy. It remains to be seen whether this sentiment will increase in the next few weeks. Another indicator is that bear markets are often cyclical – and crypto has already entered a twice as large bear market in the past.

Traditional markets are also in the red

Analysts note that the decline in digital assets appears to follow broader market developments, particularly the S&P 500 and the Nasdaq, whose indices slipped into correction territory last week. Cryptocurrencies are increasingly intertwined with traditional markets due to the involvement of large institutional funds. The cryptocurrency market has fallen even after the Federal Reserve announced it was reducing its incentives for financial markets.

Transactions are dominated by big players

Although no one wants to sell an asset without a profit, Bitcoin’s downward trends tend to see a certain group of market participants do it anyway – fearing that if they don’t sell, they could suffer more.

These panic sales are often ridiculed by long-term investors, who claim that stronger and more liquid players simply buy the coins they sell together cheaper to the detriment of those who sell.

As Glassnode confirmed this week , most deals now involve significant amounts of $ 1 million or more. The company concluded that this points to the institutions as the driving force in the chain, not to ordinary people.

Many experts predict that the decline in cryptography will continue in the near future, but only time will tell.

It is important to understand that fear and greed are powerful motivators and can often lead to quick decisions that end in loss-making transactions. Making a specific plan before investing can change a lot between making a profit or losing money.