Cryptocurrency Crashes

Cryptocurrency is a notoriously volatile industry, and this inconsistency is very circular. In economics, generally, there are seasons of downturn called recessions. Crypto has a lot of recessions, and it’s very dependent on the other aspects of the global economy. 

The success of cryptocurrency is also heavily dependent on trust, and profits wane when people don’t trust the industry to invest big. Two big failed projects in 2022 have caused a lack of confidence. In May, Terra Luna, a previously top-10 project collapse, cost nearly $60 billion for investors. In November, the FTX, a previously top 5 exchange by trading volume, filed for bankruptcy affecting almost 1 million users. 

While these collapses aren’t necessarily out of the ordinary, as the industry is very volatile, they cause skepticism for users in the months after. 

What Failed Projects Mean

While these massive projects failing may seem like a death sentence for crypto, it should be noted that currencies fail all the time. One estimate is that 92% of crypto startups fail and that most have a very short lifespan. Because this is very typical for the industry, there are many examples of this occurring and the industry recovering. These recession cycles after big projects fail are called a “bear market” or “crypto winter.” Like other sectors in the economy, a bear market occurs when the supply outpaces demand. 

Is This Just a “Crypto Winter”

The industry will most likely bounce back despite this “crypto winter” feeling more tragic than others. In the 14-year history of cryptocurrency, there are plenty of examples of a bounce back after these kinds of recessions. Expect to keep seeing talk of crypto and be prepared for the industry to bounce back because crypto is far from dead. 

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