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“Crypto Winter Could Be Over” If Bitcoin Price Does, Expert Says

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Whether bitcoin price stabilizes over the next two weeks, the prolonged crypto bear market – also known as crypto winter – could end as quickly as it started.

That’s according to Edward Moya, senior market analyst at brokerage firm Oanda, who says, “Wall Street is enjoying a positive risk mood, which is good news for cryptos.” He says the crypto market is starting to look “attractive now that the economy is doing a bit better as Fed tightening expectations have eased.”

Moya refers to the rising stock market in recent days and a general easing of macroeconomic fears among investors. Often, a rise in stocks will also increase cryptocurrencies. He says investors are starting to feel more optimistic about the economy, inflation and rising interest rates, which is a positive sign for risky assets. Generally, the more confident investors are about the stock market and the macro environment in general, the more risk they are willing to take.

Bitcoin exceeded $24,000 Wednesday, hitting its highest level in more than a month. Ethereum has been up more than 50% over the past few days and was trading above $1,600 on Wednesday.

Many crypto experts we spoke to over the past few months were expecting a final major plunge for the crypto market, with some targeting a bottom between $10,000 and $14,000 for bitcoin. While that could still happen, Moya says if more institutions buy in the next few weeks, it could allow bitcoin’s bottom to have been hit since “market positioning got extreme.”

What’s next for the crypto market and how should investors react?

Less than a month ago, the crypto was in the midst of one of the worst stock market crashes it has ever seen. Bitcoin and ethereal have fallen more than 70% since the peak of the bull run last year. Several high-profile crypto firms, including hedge fund Three Arrows Capital and crypto lender Celsius, filed for bankruptcy. The size of the industry itself had fallen below $1 trillion, a significant decrease from a few months prior when it was worth over $3 trillion.

But investors are hopeful the upheaval of the past few weeks is coming to an end, says Marcus Sotiriou, market analyst at digital asset broker GlobalBlock. Crypto prices are rising as investors are starting to feel more optimistic about the crypto market, thanks in part to the recent rally in stock markets in the United States, Europe and Asia, he says. Cryptocurrencies, especially bitcoin, have been following the stock markets closely since the start of the year.

“When the market starts reacting positively to negative news, it’s a signal that a local bottom could be hitting for the time being, as fear may have caused the news to price in,” Sotiriou said.

Despite the positive momentum of the past few days, the crypto market is still suffering. Both bitcoin and ethereum are down more than 50% this year, and bitcoin suffered its worst quarterly loss in more than a decade between April and June.

“We are in a full-fledged bear market, not a bear cycle. Just because we see positive price action doesn’t mean we’re out of harm’s way,” says crypto expert and educator Wendy O. “We are currently trading at $1,500. [for ethereum], and for me to be super bullish on Ethereum, I would need to see us break above $2,248. That’s a 50% price pump right there.

So what does the latest crypto rally mean for investors? This shouldn’t significantly change your crypto investments or the way you invest in crypto if you’re in it for the long haul. Given the crypto’s history of volatility, this increase does not guarantee a long-term reversal. Crypto prices are just as likely to fall back as to continue to climb.

Because the future of cryptocurrency is sure to include a lot more volatility, financial advisors recommend awarding no more than 5% from your crypto investment portfolio and only invest what you are willing to lose. Always make sure your financial bases are covered — from your retirement accounts to emergency savings – before putting extra money into a speculative asset like bitcoin or ethereum.

“We still have a long way to go before anything happens,” O says.

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