Crypto winter: Has the thaw begun?

Friday, October 14, 2022

Autumn is here and many of you are probably wearing your coats, scarves and hats for the first time this year since spring. But here in the digital asset world, we’ve been wrapped up against a crypto winter for months already. That means prices have been low for some time now, but signs of a thaw are already starting to show. In fact, some important developments are happening in the industry that could be laying the foundations for the next bull run. 

Why this winter is different 

Many people are saying that this bear market is different from the rest and in a sense they’re right. The way that the digital assets sector has evolved means that the current bear market has two distinct characteristics that weren’t present in previous ones. We think it’s important that investors understand this, so they are in the best possible position to manage their assets.  

One of the most notable differences is that cryptocurrencies now often display correlation with the traditional financial markets. This means that when stocks are down, cryptocurrencies are often also down too. The main reason for this is that much of the digital asset industry is composed of publicly listed companies building products on blockchains. This means that the industry can also be interpreted as a kind of token-based stock market. These tokens are also owned by traditional investors that are not directly involved in the industry that can sometimes treat digital assets like securities, regardless of their original design intentions or in-built utility.  

The macroeconomic situation this time round is also very different. A global economic slowdown, combined with stock markets nosediving earlier this year means that the digital assets sector could well be dealing with its first recession. The outlook for the world economy doesn’t look great, with stagflation affecting almost all countries and growth forecasts being slashed globally. But this doesn’t mean that outlook is the same for digital assets.  

What this means for digital assets 

Bitcoin, the world’s top cryptocurrency, might be volatile but it isn’t entirely unpredictable. Its price actually follows a four-year cycle that centres around an event called the halving, where the amount of Bitcoin introduced to the supply is reduced by 50 percent. In the two years leading up to the halving, prices tend to increase. This is followed by a year of high prices and then a year of low prices. The current bear market is more or less on schedule, given where we are in the cycle, with the next halving scheduled for 2024.  

2024 will likely be an important year for finance. Both because it is the year of the Bitcoin halving, by which time prices should have risen according to past behaviour, as well as the fact that 2024 is also when many economists and international finance organisations believe that the global economy will begin to reverse its downturn and elevated levels of inflation will decrease.  

This of course has been great for sensational deadlines predicting the death of digital assets but most analysts in the industry, as well as those building products and companies within it believe that we might see a delayed start to the next bull run rather than it never happening again. After all, new projects and use cases are popping up every day and enormous amounts of investment are still finding their way into the sector.  

Many new investors dread bear markets but they are actually important periods for the industry. Bear markets might be tough in the short term, but they are actually the times when the wealth that grows exponentially in bull markets is actually created through hard work, building and smart investing. At SMART VALOR we're not the only people that believe digital assets are going to change the world. Many of the biggest and best businesses that innovate at the intersection of tech and finance are already betting big on crypto and are all battling to play their part in taking crypto adoption to the next level.  

What’s next for crypto 

The most important factor in the next stage of cryptocurrency isn’t one token that will quadruple in price. It’s not some magic tech innovation that will suddenly make everyone understand digital assets either. The reality is that making cryptocurrency so ordinary that we barely even realise we’re using it is what will drive the widespread adoption.  

And we might not have to wait too long. Despite low prices and bearish sentiments from investors and analysts alike, there is still plenty of good news about digital assets if you know where to look. Google just announced that it will accept crypto payments for cloud services as early as next year. This is important on two levels.  

The first is that Google making such a big announcement about digital asset payments in the middle of a bear market is a clear and bold statement that the tech titan believes in the future of the industry and thinks its users do too. In fact, the CEO of Google Cloud, Thomas Kurian said that the company wants to be active in the development of Web 3, especially “to make building Web3 faster and easier.” 

The second is that this is precisely the kind of innovation that helps to weave digital asset utility into the daily lives of people that wouldn’t necessarily think to use it. Billions of people around the world instantly turn to Google whenever they use the internet or want to learn something. Now, Google will introduce those same people to digital assets as a way of using its services. These kinds of subtle adoptions by tech platforms will play an important role in how digital assets are used in the future, as well as introducing them to generations of new users.  

“The first bear market is always the hardest for new investors. But learning to see opportunities in all market conditions is an essential skill for success as a long-term investor. I’m still extremely bullish about digital assets and important steps are being taken every day by big industry players to drive forward adoption and make finance smarter, better and more effective for all.”  

Olga Feldmeier, Co-Founder & Board Chair, SMART VALOR 

At SMART VALOR, we know that making digital assets simple is the most important part of onboarding the next billion cryptocurrency users. Our goal is to introduce the power of digital assets to as many people as possible but we know that won’t happen without ensuring that people have access to the very best that the business can offer. That’s why we don’t offer the latest trends and tokens that are popping up in headlines and on social media. We’re focused on premium assets that have the potential to fit seamlessly into both an investor’s portfolio and daily life.  

Don’t let the bear market put you off kickstarting your investing career. In fact, many investors are using these market conditions to affordably buy their favourite digital assets before prices skyrocket again.