Bitcoin price sparks fears that ‘crypto winter’ has already begun

Some experts believe there’s a bleak and cold future ahead for cryptocurrency after a horror month. Better get out your coats because winter is coming.

After another horror week for cryptocurrency, there are fears that a bull run is off the cards and a “crypto winter” has already begun.

On Tuesday AEDT, bitcoin, the world’s top-ranked currency, briefly plunged below $US33,000 ($A46,000).

That marked its lowest level since July last year and was a massive fall from grace considering its November all-time high of nearly $US69,000 ($A98,000).

Its price this week represents a drop of more than 50 per cent. At the time of writing, bitcoin was slightly higher than its 2022 low, sitting at $US35,746.

It’s not just bitcoin. Ethereum, the second most popular cryptocurrency, has shed half its value since it also hit a peak in November, while Solana has fallen by 65 per cent in that same period of time.

In all, the cryptocurrency market has lost $US1.4 trillion ($A1.9 trillion) in just two months since its $US3 trillion ($A4.3 trillion) combined market cap last November.

Investors are worried that crypto is headed for an epic crash which was seen at the end of 2017 in what was dubbed a “crypto winter” or a “crypto ice age”.

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Bitcoin in the last month. It started on $50,000 but sunk to $33,000 earlier this week.

Phrase of the moment: “crypto winter”https://t.co/BsBOnUKuXTpic.twitter.com/QuAIhiDpqB

— MIKΞ⊕ΞLGAN (@MikeElgan) January 27, 2022

Crypto last endured a harsh “winter” at the end of 2017 after a bullish year.

For context, Bitcoin’s worth jumped by 1000 per cent that year while Ripple was the best performing coin of that year, up by a whopping 36,000 per cent in 12 months.

But as a result, the crypto market later crashed. Hard.

Bitcoin crashed by more than 80 per cent at the end of 2017 and beginning of 2018, to a low of $3100 per coin.

It wasn’t until the Covid-19 pandemic came along that bitcoin was able to recover some lost ground and hit a new high in December 2020.

James Malcolm, head of foreign exchange research at UBS, likened the crash to a “winter” because of its long-term nature.

“There’s this question of how do we characterise that and the nearest analogy is probably 2018, which is this idea of a crypto winter,” he told Fortune.

“It looks likely to be a fairly difficult and potentially prolonged period and therefore, the crypto winter analogy is quite good.

“Remember, the crypto winter in 2018 wasn’t just over the northern hemisphere winter months. It basically extended for a whole year – so it was a crypto winter that lasted effectively a year.”

It’s during crypto winters that the best entrepreneurs build the better companies. This is the time again to focus on solving real problems vs. pumping tokens.

— David Marcus - dmarcus.eth (@davidmarcus) January 24, 2022

Experts are particularly worried because an estimated one-fifth of cryptocurrency holders are short-term investors.

Approximately 18.3 per cent of the coin supply is held by short-term investors who are looking to turn a quick profit.

It’s these kind of traders that can crash the market by sparking panicked sell-offs.

David Marcus, the former head of crypto at Facebook-parent Meta, said a crypto winter was already here.

In a tweet from earlier this week, he wrote: “It’s during crypto winters that the best entrepreneurs build the better companies. This is the time again to focus on solving real problems vs pumping tokens.”

Others were adamant that winter is not coming.

It may snow for a few days, but there will be no winter.

— Kris | Crypto.com (@Kris_HK) January 22, 2022

Vijay Ayyar, vice president of corporate development and international at crypto exchange Luno, says the recent slump in crypto is more of a “correction” than an actual downturn.

And Bespoke Investment Group says the current fall is “downright modest” compared to the 90 per cent drops that some cryptocurrencies have suffered from in the past.

Others still think a bullish year is in store for the digital commodity.

Bitcoin is expected to surpass the $US90,000 mark in 2022, before ending the year at $US76,360 ($A108,580) according to Finder.com’s latest Bitcoin Price Predictions Report.