Elements of Optimism in the Current (Potential) Crypto WinterFebruary 1, 2022
Back in 2018, when the crypto markets took a turn south, things were looking pretty bleak. That occurred along with the bursting of the initial coin offering bubble and the whole ICO mania. At that point, many analysts believed that the same downturn in markets was completely expected and even deserved. From that vantage point, people in the crypto domain only had themselves to blame with the abundance of get-rich-quick schemes (and swindles), followed by a range of real issues that no one wanted to solve. Four years later, the markets are again in a slump and there is no sign that their fortunes will change anytime soon. However, there is a different outlook today than it was in 2018, even though some negative elements were once again self-inflicted.
The boom in 2021 again generated so many overblown prices for random tokens and their blockchain. That included both non-fungible tokens or NFTs, but also many fungible ones as well. All of this was followed by a legion of new memes, which again perfectly depicted the shallowest, most detached part of the crypto community. But, even with that bleak perspective, it seems that the lessons from 2017 and the meltdown from 2018 did not go completely over the heads of market participants. While crypto is still not going mainstream anytime soon, it shows that it managed to reach some social acceptance and tech capabilities that did not exist four years ago. That is why this crypto winter might be a more tolerable process that will cause less pain and last less time, or at least there are several reasons why many want to believe in that possibility.
The process of scaling has always been a thorn in the side of many cryptocurrency blockchains. Today, however, things like the Lightning Network that the bitcoin blockchain uses for small payments or a range of DeFi applications that operate without a glitch, show that it is more than possible to have working scaling solutions applied to established systems. In the past three years, these made huge strides from basic ideas to a set of deployable technologies that change the way anyone uses the same networks. Most importantly, they offer that chance in a way that offers a clear and sustainable benefit.
These innovations will eventually lead to processing scalability in networks that are essential for any hope of going mainstream. With them, on-chain communication can not just facilitate what users want in the current moment, but also improve the networks before that necessity becomes an overbearing pressure. That tech advantage will also impact any deep dive of the price of these tokens, as now it is clear that the same networks will not stop serving their users.
Institutions and Corporations are On Board
The concept of crypto is no longer a game that is only for libertarians, esports gamblers, and similar groups of early adopters who are still few and far between when compared to the general population. While the majority of individuals anywhere in the world are still not sold on crypto – this includes the residents of El Salvador. But, another important part of the everyday reality did come into cryptocurrencies and did it on a major level. These are so-called institutions, which means companies and corporations that began investing in the crypto ecosystem. Fascinatingly enough, many did it immediately with not just cryptocurrencies but also NFTs and many other things like social tokens.
Companies working in entertainment naturally took the front seat in this process, while tech businesses led the same initiative. The wave is spreading further and further, which now involves thousands of companies of all sizes across the globe investing money into a range of crypto-based ventures. Adidas, The New York Times, and Warner Brothers are just some of those who are presently invested in the same field. Interestingly, gaming companies have been mostly very cautious about this process, but that is bound to change soon, crypto winter or not. At the same time, others are showing no interest in leaving the same investment field. So, companies are already invested in the same ecosystem. All of them are also a great bulwark against the potential of a drastically stronger meltdown.
Ever since the 2020 bull run began, many experts in the crypto community were warning that the ultimate spoke in the crypto wheel could be not massive volatility but sudden regulatory decisions. In 2021 that scenario already took place to a point through the final ban of China when it comes to all things crypto. That event came and went, but the FUD it generated did not allow for the markets to fall through.
Instead, they showcased a remarkable level of maturity and ability to be flexible, partly because traders and investors are no longer easily spooked. Instead, common-sense regulatory moves that will likely take place in the near future, especially in the US will actually strengthen the markets, not destabilize them. Previously, many believed that regulation will be a barrier, but it is more apparent that it will be a framework for further normalization and widespread adoption.
From the present perspective, the crypto winter 2.0 has already begun, at least according to technical parameters. The further ending of fiscal stimulus that will take place not just in the US but across the world will also cement that market sentiment. So, prices will go down and the current level of BTC token value of near 40,000 will likely go down.
But, the prices will settle and that will allow all market participants to gauge just how far has the crypto market advanced. All of the previously mentioned factors will help in that process but it will still be painful and many will lose money and token value (which is even worse for anyone who believes in the long-term potential of crypto). With that in mind, all of this is pointing to a scenario where the same incoming winter does not have to be either long or hard.