Crypto Winter: What is it and how to prepare

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Crypto Markets has recently declined sharply. Total market capitalization fell nearly 35% from mid-December 2024 to mid-April 2025. The crypto market bounced back, but the recession caused winter fears.

But what causes the code winter? What does that entail?

Here’s the background to the 2022 crypto winter, and how to identify ways investors can prepare for future crypto slump:

What causes winter in codes?

The term Crypto Winter was first used in 2018 when Bitcoin crashed and Crypto Market experienced long-term low prices and low trading volumes. Some typical markers in crypto winter include lower market prices, lower overall market value, and negative investors’ sentiment.

Crypto winter can be caused by many factors, including macroeconomic changes (interest rate hikes), speculative bubbles bursting, major market manipulation and scandals.

Below are other important factors that could lead to cryptography winters.

• Decline in interest from institutional investors: Institutional investors have played a key role in contributing to the success of major cryptocurrencies such as Bitcoin and Ethereum. However, if they realise that cryptocurrencies are beginning to decline or stagnate, they may hesitate to participate in the market, leading to a decline in asset value.
• Market oversaturation: Cryptocurrencies that do not have strong business plans or unique value propositions may not survive in the market in the long term. As the coin market becomes more competitive, it becomes difficult for new coins to stand out.
• Major security violations, hacks, fraud: Major cybersecurity issues and fraud can shake investors’ trust in cryptographic networks. In 2014, for example, Bitcoin lost nearly $500 million worth after Goxyama, a Tokyo-based exchange, filed for bankruptcy. Mount Gox had many cybersecurity issues that prevented Bitcoin withdrawal from being processed.
• Unclear regulations: Since their first introduction to the market, both cryptocurrencies and blockchain technologies have faced regulatory hurdles. As government surveillance tightened, litigation and regulatory measures increased, and crypto hype was dampered.

Bear Market vs. Crypto Winter

The terms bear market and crypto winter are often used interchangeably in the crypto world, but bear market and crypto winter can occur simultaneously, but not exactly the same. Crypto winter refers to a period in which stocks and currencies in the crypto world lose their popularity and value and stagnate. The bear market occurs when the price of a financial asset falls by more than 20% from the recent market high.

Crypto Winter 2022

The 2022 code winter was partly driven by high US inflation, leading to aggressive rises in interest rates by the Federal Reserve. Other major contributors include.

• The collapse of the cryptocurrency of Luna and Terrausd in May 2022 caused Bitcoin to its lowest price since 2020.
• Three Arrows Capital, a crypto hedge fund that managed approximately $10 billion in assets at its peak, crashed after investments in collapsed coins.
• The November 2022 FTX bankruptcy and collapse reported that cryptocurrency exchanges mismanaged their customer funds.

Overall, the industry erased more than $1 trillion from the market in 2022, according to The New York Times. According to Coingecko’s 2022 Annual Cryptocurrency Industry Report, on November 14, 2022, the total value of the top 100 cryptocurrencies was around $83 billion, a significant decrease from the $2.7 trillion market capitalization observed on November 7, 2021.

How to prepare for the code winter

Predicting when crypto winters will begin or end is very similar to trying to predict how high crypto assets will be in bullish times (when prices rise by more than 20%). It’s certainly near impossible to know, but if you’re trying to withstand the risks and volatility of crypto, you can still try it.

“It’s impossible to predict how high or low they’ll be because crypto prices are based solely on trader sentiment,” says James Royal, a leading investor at Bankrates. “So it’s especially important to mitigate the overall risk by never trading with money you can’t afford to lose. For example, keeping your overall interest in Crypto at a few percent of your total investment portfolio ensures that even a total wipeout will not affect your overall wealth.”

There are ways investors can navigate the crypto winter, similar to the strategies used in traditional stock markets to survive the bear market.

• Stay up to date with Cryptocurrency News: Keep your fingers in a pulsating pulsation of what’s going on through industry news channels, discrepancies servers, social media, and trusted investment publications.
• Monitor investors’ sentiment: See how Crypto is trading by monitoring popular exchanges.
• See beyond the code: Consider diversifying your investments outside of crypto space and experimenting with strategies such as averaging dollar costs and risk management.

“Their prices are driven by sentiment, so cryptocurrencies that have shown greater elasticity, such as Bitcoin and Ethereum, could be better than unknown coins,” Royal says.

Conclusion

Crypto winter is a period of long-term decline in the cryptocurrency industry, and can be difficult to predict and navigate. However, investors can prepare for the future by keeping cryptocurrency news up-to-date, monitoring investor sentiment, and diversifying their investments.

Note: Former Bankrate editor Nina Semchuk contributed to an earlier version of this article.