Cameron and Tyler Winklevoss, also known as the Winklevoss twins, stated today that the crypto industry is in a period of contraction which is more commonly known as "Crypto Winter". As a result, they have laid off 10% of Gemini's workforce a first for the company. No one can deny that the last few weeks have been rough and while there are a variety of issues that facilitated this LUNA's complete meltdown and explosion played a significant factor.
When I think back to crypto winter I cannot help but think back to the 84% plunge that occurred between late 2017 and early 2018. Something that surprised me when I looked into when exactly the winter occurred the answer is far from straightforward. Some places state it was from early 2018 through mid-2020 while others state it was just the crash itself and ran from late 2017 through 2018. With answers this wide-ranging and the only common denominator being that 2018 was part of this period it is hard to really hash out.
During the previous winter's crash people in Bitcoin really could not get out quick enough. This time around though has been vastly different as the fall into the low $40,000 to high $30,000 range existed for months and what really kicked Bitcoin in the knees wasn't the inflation number (though they did not help) but was the collapse of LUNA and UST. Since LUNA had billions in Bitcoin reserves these were deployed and quickly exhausted. This flooded the market with Bitcoin liquidity that we really have not had in quite some time. In the past few weeks though we have seen Bitcoin push above the $30,000 mark a few times even with the financial markets getting destroyed.
To reach the levels seen the last time around Bitcoin would need to fall to roughly $9,500 meaning another $21,000 fall. While this is not impossible as we are talking about crypto after all this would be a drop that would not only cause harm to the crypto and blockchain industry but would also drag down some of the biggest tech companies in the world. Tesla, MicroStrategy, Block, and even Meta would be caught up in this and drug into Bitcoin's tailspin. Because of this, it seems to me that it would be much much harder to occur. A variety of companies and organizations are involved with various aspects of this new and growing economy which is something we did not have the last time around.
The amount of money being poured into the industry as well continues to remain extremely strong and just last week a $4.5 billion fund was announced. To me from 2017 till 2019 the winter existed and this time it is a cold front. The market has bounced back and range traded for most of this year and really has bounced back rather well from the LUNA shock. If Bitcoin had not returned to the high $28,000 to $32,000 range I would have been more concerned but it has held up.
Working with the reasons a Crypto Winter is called one involved not just the price crashing and staying down but also innovation ground to a halt. Interest in the industry as well dried up and this was during a time that the stock market and economy were in a great place. Times are different now as there are macroeconomic issues occurring and the space has grown on multiple fronts in a variety of different ways. NFTs, Blockchain games, and just general use cases have soared and this provides the industry with a much more protective shield from a repeat of history. If the markets were not as developed as they are it would be a different story entirely but now they are and the money still continues to pour in to further support it.
For Gemini, though just like with Robinhood their performance and subsequent staff cuts do not provide a clear picture of the industry because of how large it has grown. These two marketplaces represent centralized exchanges that have already had to deal with decentralized exchanges cutting into their usage. Different coins that these centralized exchanges do not have listed can pick up steam and undergo a huge jump yet this is not represented in these exchanges' numbers.
With innovation and money continuing to pour into the sector as Binance Labs has announced a $500 million fund for Web3 start-ups Crypto Winter does not seem to be a fitting term. Could it be a Crypto Fall or a Cold Spell? Absolutely as the market is down and bearish but three factors are frequently pointed at to show winter and right now all we have is the bear market since the funds and innovation continue to flow in the space.
Please know I am not a financial advisor and make sure you do your own research! If you enjoyed this article and would like to further support me below are a few referral links that if you used when signing up I would appreciate it! Also, follow me on Twitter @Cje95_
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