One of the major concerns of the already declining crypto economy is the happening of the crypto winter season. The Winter season is known for being the market condition where almost every cryptocurrency faces a reduction in value. The season is believed to prevail for a longer period of time which usually spreads over multiple years.
Except for the past two days, Bitcoin was losing thousands of dollars on daily basis in terms of value. Luckily the last two days, it was able to acquire a few value gains which increased the value above US$ 37,000. Once again Bitcoin seems to be moving towards a crucial crossroads where one road leads it to above US$40K and other at below 40K.
But what has become more concerning for the plethora of cryptocurrencies is the taking place of a season known as “crypto winter season”. It is believed to be a season where fear amongst the global crypto community is higher than ever. It has been seen in the past that when this season prevailed, there has been a massive change in global crypto economy. Each cryptocurrency has been seen losing value on a daily, weekly, monthly, quarterly as well as on annual basis. It is widely believed that when the winter season is there it does not end in a short period. Instead, the season is prolonged for many years. So the growing of fears amongst the crypto community is logical because there are plausible circumstances prevailing which can attract the winter season.
This fearful season was initially seen in 2017 when Bitcoin lost 80% of its value and started to be sold at a low price of US$ 3,100. The season then ended in the last month of 2018. Thereafter, the season came back again in 2018 and this time the season expunged 50% of Bitcoin’s value.
There are two reasons currently which may initiate the winter season as has been predicted by UBS i.e. the largest Swiss bank. UBS argues that Federal Reserve is thinking of increasing the interest rates. Resultantly, cryptocurrencies, including Bitcoin, will lose a considerable amount of investors’ interest. UBS further claims that if central banks of the world are able to control inflation, then Bitcoin purchasers will automatically be reduced. The bank further argued that it was because of the stimulus packages which helped the crypto-economy to eventually grow manifold in 2020-21.
Even the CEO of JPMorgan also talked about Federal Reserve increasing the interest rates. He added further that the Fed might be increasing the rates at least for four times in this year.
UBS’s experts further argue that many investors have realized that Bitcoin is not a better investment option considering its highly speculative nature.
The second concern with regard to the crypto economy is the “regulation”. UBS’s experts argue that it is because of consequences of speculation which are inviting more debate on crypto regulations and asking for implementation.