The creator of Cardano announced the beginning of a new “crypto winter”. Is it really?
The founder of Cardano, Charles Hoskinson, called the main reason for the fall of the altcoin ADA the day before . According to him, the crypto market has moved to a bearish trend, so the fall of the vast majority of coins should not surprise anyone. In addition, Hoskinson does not yet see any prospects in the near future that could provoke a rebound in the market up. Let's talk about the situation in more detail.
Recall that the so-called bullish and bearish cycles are the usual components of the life of various markets in general and assets in particular. Bullish trends are characterized by the growth of coins, which attracts new investors and forces them to invest money, thus raising prices even higher.
At the same time, bearish trends are the reverse situation. During such periods, belated investors try to get out of positions at a better price, or simply eventually give up and merge them into a loss. Accordingly, in this case, Hoskinson hints that difficult times await crypto investors.
What is happening with cryptocurrencies
The founder of Cardano published his point of view on Twitter. Here is his quote from the CryptoPotato news portal article .
Yes, it's called a bear market. That happens. Nothing can change him. No announcements will change the situation. Cardano could cure cancer, give you a personal robot that plays poker and takes your grandma to church on weekends. But even after that, the price of the altcoin would continue to fall.
In other words, the developer does not believe in the growth prospects of the digital asset market. Moreover, such a trend will be relevant even in the case of active development of crypto projects. By the way, usually the development phase for blockchain assets is the most intense just at the stages of the market collapse.
Indeed, the Cardano network has had several major upgrades relatively recently, including the launch of a so-called cross-chain bridge. In addition, the block size of the coin has been increased to improve throughput. But even such positive news from a fundamental point of view was not enough to stop the fall of ADA. At the moment, the coin is trading around $0.67. In just seven days, its value fell by almost 14 percent, while over the month the asset fell in price by at least 35.5 percent.
Another factor that may confirm bear market fears comes from the latest analysis by CryptoQuant platform experts. They stated that Bitcoin’s bullish trend stopped in July 2021 – and since then, the market trends have changed in the exact opposite direction.
That is, analysts confirm the transition of the niche of digital assets to the collapse phase. At the same time, their mention of July 2021 seems strange: after all, Bitcoin set its absolute value record at $69,000 in November 2021, that is, almost six months after the mentioned summer period.
The company's analysts explain what is happening by the ratio of commissions and rewards to miners. The higher this indicator, the more profitable it is for miners to do their work, since they do not need to additionally hold BTC - and vice versa. Since this indicator has fallen sharply from the highs of April 2021, CryptoQuant has identified what happened as “a sign of a bear market.” Miners must now sell some of their mined bitcoins to cover costs.
Hoskinson's words and cryptocurrency charts are reflected in the Fear and Greed Index from the Alternative portal. Recall that it ranges from 0 to 100, where the first digit indicates the total panic of traders, and the second indicates strong euphoria. Now the index fluctuates around 10 points, which can be interpreted as "extreme fear".
The correlation of the index with prices is quite simple: the more the value of assets falls, the more panic it causes among market players, and vice versa. The last time the indicators were so low was on January 23, when the trend towards a serious fall in stock markets was outlined in the macroeconomics. All because of the new policy of the US Federal Reserve, which is forced to raise the base rate to cope with inflation amid the effects of the COVID-19 pandemic and geopolitical instability in Europe.
What is the real "crypto winter"? This is a process of a long fall in the prices of cryptocurrencies, which can last for months or even years. The previous crypto winter ended in December 2020, when the price of Bitcoin fell by at least 85 percent since its last all-time high of around $20,000.
The current all-time high is fixed at $69k, and an 85 percent drop would mean BTC dropping to around $10,100. Can a bearish trend of this magnitude repeat itself in the foreseeable future? Many experts disagree with this view. For example, the creator of the Avalanche blockchain project, Emin Gun Sirer, said a month ago that classic bear markets for cryptocurrencies could not be expected in the near future. Here is his response from Twitter .
I continue to argue that the deep bearish trends that traders are so accustomed to will not happen anytime soon. But nothing, continue to believe in it and avoid large-scale stages of growth.
We believe that the cryptocurrency industry may indeed move into a local bearish trend. In other words, the sphere of coins can expect a recession, collapses and other unpleasant things. However, it is now hard to believe in the prospects of multi-year collapses, since the niche of digital assets has acquired a huge number of useful services and platforms that can be used on a daily basis. Therefore, it is likely that a serious interest in digital assets will, to a certain extent, protect them from long-term problems.
However, it is important to take into account the situation in the field of traditional finance and the world as a whole. If everything goes badly there, then the crypto is unlikely to magically force investors to invest in themselves. Although it is almost impossible to predict something here.
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