Financial Independence · investing

Is a new Cryptowinter coming?

Winter is coming. It can’t be avoided. It comes after Autumn. But are we now in summer or are we in autumn? For sure we are not in spring anymore. Bitcoin prices have been around the 45000$ mark now for a while, and Bitcoin has been drastically dropping with every whims of bad news around.

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One coin to rule them all

Some say this is the start of altcoin season. I do believe sooner or later an Altcoin will overtake Bitcoin. Bitcoin believes are a big fan of the tech, but if you feel the tech is what makes Bitcoin so good then you should know that Tech always improves and sooner or later a New Tech will overtake it.

But I don’t think we are there yet. Since 2013 the Crypto market has always rallied behind Bitcoin, and I don’t see it changing. At least not this year. We still see that when Bitcoin drops the market drops…more. Bitcoin is usually, and is still now, the stabilizing force in the Crypto market. Even Elon Musk tweeted this when he tweeted “one coin to rule them all”.

We do see that some coins are rallying and outperforming Bitcoin, but they tend to drop back sooner or later and follow the regular pattern a lot. Ethereum has a good chance because of the Tech, but then again Cardano is supposed to be the new Ethereum.

The Bitcoin winter of 2017

We had actually more then one Crypto winter, the first one being in 2013, but the most famous is the Bitcoin 2017 winter.

Bitcoin rallied to about 20.000$ and then fell hard and sharp.

Some say that the Crypto winter was caused by a massive amount of Altcoins and Initial Coin offerings. The quantity was infinity higher then the quality. It became such a joke that eventually this caused the market to Crash. It took years for the Crypto market to recover to all – time highs.

The market did recover, just like in the 2013 crash. But not all coins recovered. Its not certain that some Crypto’s will not fail completely because of the tech.

Are we on the verge of Crypto Winter today?

The crypto market is pretty weird today. And it actually reminds me a lot of the stock market 3 months ago. Meme Crypto is reaching all time highs with Dodgecoin taking the lead, boosted by the twitter powers of Elon Musk.

What seems to be certain today is that Elon Musk controls the market right now. One tweet of Musk can drop Bitcoin with 10% or make any coin double in no time.

This tweet is something that most people already knew. The tech of Bitcoin is becoming outdated, and is consuming more and more energy, and its time to clear the playing field for new tech. Musk tweeted the following recently:

Musk never really announced what Cryptocurrency he sees as a replacement for Bitcoin. We know by now that Elon is a strong believer of Dodge.

Elon also tweeted a bit later that Dodge would need a lot of improvements to get to where it needs to be. He also implied he could create his own coin, although he noted that using an existing coin would be much easier. Those tweets seem to have been removed for now and the only one remaining is this:

Most likely they were removed as Elon wanted to avoid a market crash.

But looking at the market it hasn’t helped. The stock market does not like uncertainty and the Crypto market is no different. When there is any sign of uncertainty then we can expect a big sell off.

Now if we look at the most recent chart of Bitcoin (keeping in mind the 2017 chart), we are seeing this:

Notice how the end is bowing off? That can mean two things, the start of a longer drawback, or Bitcoin is preparing for another rally.

Somehow after Elon’s tweet I don’t see another rally happening soon. So then the question remains will another Coin overtake Bitcoin? Its hard to say. Doge seems funny enough to be the best candidate right now, but I would not dare to exclude that Elon would create his own Crypto currency. He certainly has the recourses to do it if he wanted to, although Facebook did try without much luck in the end.

Today is different

Everyone says that 2021 is not 2017. Today its going to be different. The Crypto market has matured and institutional investors have entered the market. Crypto is here to stay.

This could all be true but that doesn’t mean we cannot have another Crypto winter. It also does not mean that some coins could disssapear.

Looking at the bellow chart from Coinbase it does seem like institutional investors have discovered Crypto (dark blue is institutional):

Even more institutional investors have overtaken retail investors. They have a lot more money probably, so this could be the beginning of a bull run.

But institutional investors don’t like losing money either, and when there is one guy controlling the entire market with the click on a button by sending out tweets, I am sure it makes them cautious of putting in any more money.

Winter is coming

What we are also seeing is that Crypto currencies are popping out of the ground like there is no tomorrow. There is now over 5000 altcoins listed on coinmarketcap. Some of these coins are really claiming to solve a problem in the Crypto world, but a large portion of them serve no purpose, and probably will not serve any purpose, ever.

In Belgium there is a saying. If the butcher starts to give recommendations for a stock then its time to get out of the market.

Guess what? Everyone is doing Crypto these days. Coinbase just reached the #1 in the Apple App store! Great news for Crypto right?

Well the last time this happened was December 2017. Just before the crash.

I am not saying this will be tomorrow, but Bitcoin is at a high risk of losing momentum. Everyone who is investing in Altcoins because they are offering great tech should keep in mind that if the Crypto market collapses, and stays flat for a year, those developers will not be so tempted to keep developing. Investing in a promising altcoin with great developers, is no different then investing in a startup. Potential High Rewards, but also high risk, and potential high losses.

We all read the stories about people making big money in the Crypto world. Enough to retire. But keep in mind that for every story of a guy making bank, there is just as many that have lost out on coins that got pumped & dumped. These are the stories you don’t hear about.

Final words

As a Coinbase investor obviously I believe in the blockchain technology, and I don’t think it will go away.

Just like the stock market the Crypto market moves up and down. Stock crashes happen, and the crypto market is no different. That doesn’t mean markets don’t recover, if the crypto market is anything like the stock market they will. However its a challenge to spot the Crypto’s that will make it to the finish line. Something tells me we will see some casualties along the way.

As always do your own due diligence and invest with caution.

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3 thoughts on “Is a new Cryptowinter coming?

  1. The crypto space is like the wild wild west of investing–even having weathered two bear markets, it’s still challenging to know whether and when to pull out of the shitcoins. Just in the last week, I experienced a 30x, a rug pull, and 2/3rds of my holding are down. This downturn is extending a bit longer than usual and is dipping deeper than we’re seen in this market so far… there are lots of projects I believe in but, as you said, they won’t survive an impending winter. It’s an interesting time, for sure, and it truly could go either way at this point.

    Liked by 1 person

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