LeoGlossary: Crypto-Spring
Crypto-Spring is the other side of Crypto-Winter. This is a period investors seek as to be the end of a bear market in cryptocurrency.
As they say, hope springs eternal.
Cryto-Winter is a period of suffering. This tends to be a nasty bear market. Most coins and tokens loss a great deal of value as the sentiment shifts to risk-off. This causes downward pressure on pricing, usually bringing a great deal of volatility as fear takes hold.
If we were to chart this with the business cycle, it is the period from peak to trough. As things top out, we watch the slide down. This ends up seeing defaults increase, especially those projects that were funded using venture capital money.
In the 2022 cycle, we see the problems of Celsius and FTX as examples of this.
Time For Optimism
Crypto-Spring is the other side of the trough. Here is where the builders start to get some encouragement that they could be rewarded for their efforts through the winter period.
Since the clearing out took place, market leaders change. Businesses that were popular during the last bull market are not even around. There are different applications that are pulling in users.
Crypto-Spring is the end of the bear market and kicks off another run. The bulls come out in force as prices start to creep higher.
A mental visualization is similar to the ground thawing after a long, cold Winters. Spring is the onset of a new season, one where live starts to emerge.
Payment
This is also the period where people start to see how they will be paid. Those who were filling their bags during the Winter see how they are positioned to take further advantage in price gains. Those who speculated by dollar cost averaging begin to get rewarded.
There is an old saying: bear markets are where one makes money; bull markets is where one gets paid.
It is a concept that is not only true from an investor perspective. Entrepreneurs and those building businesses see the same result. Since many companies encountered issues with the bear market, new projects can step to the forefront.
Risk On
Sentiment is a huge driver of markets. Actually, that is true for the entire economy. As people become more optimistic, risk-on sentiment starts to emerge. Where the Crypto-Winter is highlighted by the move to safety, with stablecoins being used to seek yield, more speculators start to enter the market.
The investment world is split between yield and speculation. Both are seeking a return, just they approach it with a different risk tolerance.
Crypto-Spring, as evidenced by the move to risk-on, shows the appetite for risk is growing. This tends to be reflected in the markets as the bull stampede. Of course, depending upon the depth of this, we could simply be starting the process of another bubble.
Shift In Narrative
Here we get a bit of the chicken or the egg.
As Crypto-Spring starts to emerge, there is a shift in the narrative. During the Winter, FUD reigns supreme. The most recent cycle saw stories of CBDCs, outright bans of Bitcoin, and impending regulation. We have reports of governments trying to cut off access to and from fiat currency. There are also rumors of banks showing an unwillingness to support cryptocurrency, especially the exchanges.
This all disappears once Crypto-Spring arrives. The sentiment moves from one of FUD to FOMO. As markets start to turn, the narrative matches. With each new level on the upward slope, things are ratcheted up.
Suddenly, some of the focus moves to blockchain projects (companies) that are providing solutions to real world problems. Instead of the rug pull, losses, and other areas of concentration, even the narrative takes an optimistic tone.
General:
Posted Using LeoFinance Beta
