It’s safe to say that crypto’s been a roller coaster ride over the last few years.
From highs of $69,000 back in 2021 to the crushing lows that followed, many investors wonder if another bull market is just around the corner.
And from the looks of it, Bitcoin prices have already started to take off since the beginning of the year.
So is crypto winter finally over?
Let’s learn more about this recent crypto winter, why it may be ending, and whether investing in this asset is still worth it.
Why Do Crypto Winters Happen?
Crypto winter is usually a long period of stagnant or falling crypto prices, scaring off investors and reducing trading activity. With cryptocurrencies being so volatile, external factors like global events, security breaches, or new government regulations can cause prices to drop significantly before they eventually rebound.
For example, the most recent crypto crash happened in 2022, right after one of the longest bull markets in history. It’s hard to say if there was one specific event that led to it, but some sources boil it down to:
- The war in Ukraine
- China’s crackdown on cryptocurrencies
- Recession fears
- Interest rate hikes by the Fed
- Recent bank closures
- A slow post-pandemic economic recovery
- Record high inflation rates
When one-off events happen, the crypto market has the chance to rebound quickly. But given how chaotic things have become in the last few years, a perfect storm was brewing in the background. It was only a matter of time before crypto prices would drop.
Why Are Crypto Prices Bouncing Back?
In case you haven’t heard, Bitcoin prices have skyrocketed by 73% since the beginning of the year.
But why are prices suddenly going up? To answer that, let’s look at why crypto’s been seeing a comeback in the first place.
The Beginning Of A New Cycle
Cryptocurrencies may seem unpredictable on the surface. However, some experts claim that the crypto market has had predictable boom and bust cycles.
When you look at Bitcoin’s prices since 2011, you see a particular pattern emerging.
The first two years see a rise, followed by a sharp fall during the third year. At some point after the decline, the coin’s “halving” occurs, which cuts its supply. Less Bitcoin creates a surge in demand and increases the coin’s price by year four.
If the trend continues, we could expect even higher prices very soon.
The Banking Crisis
Signature Bank becomes the third US bank to fail in less than a few months, which naturally increases doubts about the stability of the country’s financial system. Many investors are scrambling to find other ways to store their wealth. The economic uncertainty also makes many people wary of fiat currencies like the US dollar.
Both of these issues give Bitcoin a golden opportunity to position itself as a safe haven that could weather out the stormy financial waters ahead.
Crypto Is Becoming More Widespread
Even if the financial situation is looking uncertain, it hasn’t stopped cryptocurrency from becoming more mainstream. Hundreds of large companies like Amazon, Airbnb, and even Burger King are beginning to accept digital coins as valid payments.
To take it further, entire countries like El Salvador and the Central African Republic consider Bitcoin a legal tender.
Blockchain technology and decentralized finance (DeFi) projects also keep becoming more advanced, so there’s a strong chance we haven’t seen crypto’s full potential just yet.
These positive moves build trust with potential investors, potentially increasing crypto’s value over the long term.
Is Crypto A Safe Investment In 2023?
There’s no doubt crypto has a lot of potential going forward. An unsafe market, rising interest rates, and macroeconomic instability leave many investors looking for “safe” alternatives.
However, remember that crypto is volatile, and prices fluctuate daily. For better or worse, one event or external chance could determine a coin’s value overnight.
With this in mind, invest only what you can afford to lose. You should also diversify your portfolio to include stable assets and offset potential losses.
The Bottom Line
The recent boost in crypto prices could be a sign of a new rally right around the corner. At the very least, we know it won’t be dying any time soon.
However, the cryptocurrency market is notoriously unpredictable. Always stay informed, invest wisely, and be prepared for any unexpected surprises along the way!
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