It all started around July 2020, not long after Bitcoin reached an all-time high value of around $70,000. This was a monumental achievement, and the blockchain industry made a significant wave. The impact was so massive that the effects trickled into mainstream media. Little did we know that a crypto winter was next to come.
The Start of the Drop in $BTC Price
After reaching that height, there was a sudden drop in value to less than $50,000. However, most people were still adamant and waved it off. According to most enthusiasts, this was a necessary price correction, and the upward trend will continue in due time. Nonetheless, subsequent events were nothing like people expected.
The drop continued, and it seemed like something out of a movie. It was so bad at some point that the price of $BTC dropped below $20,000. At this point, everyone was seriously panicking, and people who were in for the money quickly left. Even El Salvador “toned down” on the Bitcoin gospel and decided to wait out the harsh conditions.
Some people also opine that it was the end of Bitcoin as there was no hope in sight. It took the first cryptocurrency finding support at $18,000 for people to take a breather. Since then, there has been some positive improvement. Price rose above $20,000 and even showed promise at some point to reach the $30,000 mark.
Despite the promising signs, the market is experiencing some sort of stalemate. While there has been a gradual increment in the price of Bitcoin, it has not really recreated that same 2020 buzz. Nonetheless, the investors are gradually creeping back in.
The term crypto winter was not really a common thing until the recent turn of events. For the most part, there is a bear market, and there is a bull run. The bull run is similar to actual bulls running without stopping, and the indicators include climbing prices of tokens over a substantial period. Bear market, on the other hand, is the reverse and applies similarly to when bears are lazily trodding along.
Crypto winter is when the bear market stretches on for an extended time. Within this period, investors are selling off their tokens, and confidence is low. For a better understanding, think of it like the regular winter season. Activities are low down, and plants do not really grow or blossom.
With knowledge of what a crypto winter is, let us examine the cause of the incident that went on for more than 2 years.
What Caused the Crypto Winter?
Most people will attribute the recent crypto winter to the movement of whales. In crypto, whales are investors who hold significant amounts of tokens in their wallets. Their portfolios are so large that any changes to them will lead to powerful ripple effects in the DeFi sector.
Remember what they said about the ocean currents changing because a whale opened its mouth? The same principles apply here too.
In 2020, many of these investors decided to sell off their investments. These continuous sell-offs caused a huge drop in the prices of Bitcoin and other cryptocurrencies. However, the whales were not the only reason for low faith, especially from micro investors.
There were several negative incidents within the Web3 space that further worsened the situation. For example, crypto lending firm 3 Arrows Capital or 3AC also declared bankruptcy. As if that was not bad enough, the Terra incident followed suit, and the entire algorithm came crashing. There were several other adverse incidents that also took place within this period.
These negative occurrences further dented the already defamed image of the Web3 space at large. What made these incidents more devastating is how they affect micro-investors. These individuals may not hold a mammoth number of crypto, but they are the actual users of blockchain tokens.
They constitute a major part of crypto communities and are essential to the adoption of this technology. Violating the trust of these individuals does more than extend the crypto winter. This action has significantly halted the adoption of blockchain-based solutions. Most people now see projects like a pack of cards whose crash is imminent.
Ending the Crypto Winter: How Blockchain Firms Can Rebuild Trust
Truth be told, the critics have every reason to harbor distrust for the system. People once trusted the technology with their resources, and it failed to deliver. Nonetheless, it will be futile to keep holding on to the past. Instead, we can all learn some lessons and make some corrective decisions moving forward.
One of the things that crypto firms can do to rebuild trust is to be transparent. Transparency is not just being audited and certified okay by Certik. Instead, it is about clearly educating members of your community about your ecosystem. The process should be so simple that people who use your products and services can educate other people about it.
Finally, crypto companies should develop simplified solutions to real-life problems. Bitcoin is a revolution of global money transfer on a scale that has never been seen before. However, one of the major difficulties with making a bitcoin payment is the complexity of doing so. Unless you have been in the space for a while and understand certain technicalities, you can permanently lose your money.
Web3 companies should take a cue from Tectum SoftNote when developing solutions powered by blockchain. SoftNote Bills are crypto certificates that enable people to transfer Bitcoin for free. In addition to paying zero gas fees, users can also protect their account information when sending crypto to people around the round.
The best part is that the receiver does not need to own a blockchain wallet to claim the funds stored in the SoftNote. Such a person can easily scan the QR code to retrieve the Bitcoin or Ethereum held in the SoftNote Bill.