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A Crypto Winter Survival Guide

Alphabet Inc’s third quarter earnings call revealed a slowdown in revenue growth. And if Google’s chief business officer Philipp Schindler is to be believed it is due to reduced ad spending brought on mainly by a crypto winter. Google ads has witnessed a drastic drop in revenues as companies cut down on spending, starting with brand advertising.

The tech giant admitted that ad spending by financial institutions have affected business. The overall growth by Google ads was at 6%, the weakest quarter since 2013.

crypto market
From highs of $69,000, Bitcoin has fallen by over 50% and currently hovers around $20,000. (A smartphone showing the Bitcoin price chart; Image Credit – Freepik)

Crypto Winter and a Disappearing Ad Market

The term crypto winter refers to a slump in the crypto market. Cryptocurrencies have seen their prices tumble as the stock market crashed, burning through investor savings.

A record-high inflation has also tightened budgets with people choosing to stockpile necessities, afraid of a price change.  

The volatility of crypto markets also makes it difficult to predict when the slump will be over. Most crypto companies have adopted a cautious approach, choosing to freeze funds, stop hiring, and even initiating layoffs in some cases.

Although in recent weeks, the prices appear to be plateauing, investors are wary about investing as threats of a recession loom large. After reaching a peak of $69,000 in November 2021, Bitcoin has oscillated wildly between $20,000 and $25,000. However, according to the Bitcoin rainbow chart, Bitcoin will reach six figures in the next two years.

A bear market and a crypto winter are not necessarily correlated but it has compounded worries for investors, and has made risk-averse Wall Street put up walls around its finances. Most crypto companies refrained from ad spending, a far cry from the jubilant outlook at Super Bowl.

According to Alphabet CEO Sundar Pichai, Google advertising has borne the brunt of the changing macroeconomic climate.

Surviving the Crypto Winter

When one feels stuck in an unfavorable climate, it goes without saying that one must focus on the bigger picture. Investing is a balancing act that invites us to study the risks and benefits before placing out bets.

After winter comes spring

Yes, it is a harsh market. But recent changes suggest that the ice is thawing and prices have started going up. Surviving a crypto winter is key to building wealth. Crypto projects like Solana, Cosmos, and Uniswap were launched during bear markets and held out long enough for investors to make staggering profits. As Elon Musk says, “Buy the dip.” However, as with any other investment, you must be prudent about your money. Most people who turn profits during a bull market are the ones who simply weathered the storm.

Expected Value Analysis

Expected Value is defined as the difference between expected profits and expected costs. The formula takes into account all possible variables and its probability of occurrence.

Expected value analysis is also known as economic risk analysis. Instead of relying on others’ predictions or crypto companies, calculate your own risk analysis before taking action.

If an investor plans to buy $1,000 worth of token X, let’s assume the highly volatile token has a 96% chance of going to zero and a 5% chance of soaring to $30,000. The formula to calculate the expected value of this investment is:

EV = (-$1,000 x 0.96) + ($30,000 x 0.05) = $540

The expected value gives us a fair idea on what to expect and whether we should risk it. Even though the market is extremely volatile, it is important to do due diligence before investing in any crypto scheme.

Patience is key

With any kind of trouble, one should not let stress force one’s hand. Amidst a crypto winter, it is good to patiently observe the market conditions instead of following the latest fads. By its very nature, cryptocurrencies are expected to keep fluctuating and this can be good or bad depending on your response. Reacting to every change in the crypto market could spell doom for your investment and put your hard earned money at risk.

Read More: A Crypto Winter Survival Guide

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