Crypto winter: advertise or pause?

April 29, 2023
Jan Rick

Should You Continue to Spend on Advertising More During a Crypto "Recession"?

2022 has been a rough year for the crypto sector, with finance and crypto experts expecting this to be a long crypto winter. Bitcoin has taken a dive in recent months, along with Ethereum and other cryptocurrencies. Coinbase, one of the top three crypto exchange platforms, has seen its stock fall alongside tech companies like Amazon and Netflix.

Even the popular proof-of-stake network Solana's coin has dropped in value by roughly 80% since its all-time high in November. The tipping point, however, occurred when the major algorithmic stablecoin TerraUSD (UST) plummeted dramatically.

But it doesn’t mean that the crypto house is going down.

Despite the volatility and recent price drop, many experts believe that the crypto winter will soon be over, as long as Bitcoin’s price stabilises over the next couple of weeks. This is possible by increasing positive risk-on mood, with the help of advertising.

What Caused the Crypto Meltdown in the First Place?

Stocks have plummeted from all-time highs set in January, with the S&P 500 index entering a bear market this week. Add to that the consecutive interest rate hikes by the Federal Reserve.

Cryptocurrencies have not been spared. Since reaching an all-time high in November, the value of the world's most popular digital currency has dropped significantly, and its competitors are also suffering.

This is because they are affected by the same factors that affect stocks and other assets.

Consumer prices are rising at the highest annual rate in more than four decades, and in turn, the Federal Reserve is aggressively increasing interest rates to deal with this inflation. These conditions make borrowing more expensive for individuals and businesses, raising fears of an economic downturn.

This episode just proves that cryptocurrencies are susceptible to macroeconomic forces such as changes in interest rates, but not in a direct way.

What Does This Mean for Crypto Investors?

Market downturns can be frightening, particularly for crypto investors who rely on macroeconomic outlook to make decisions regarding their investments. Investors are currently experiencing economic uncertainty, forcing many investors to shift away from riskier assets such as cryptocurrency.

This uncertainty, however, will not last forever. Investors will eventually be willing to take on more risk, and when that happens, cryptocurrency is likely to boom once more. Regardless of the macroeconomic environment, solid digital asset projects with real-economic utility will do well.

The next step will be for investors and executives to persuade the rest of the world that crypto, particularly Bitcoin and stablecoins, is still a viable experiment. They certainly have reason to do so because crypto markets can be driven up by belief.

The most effective tool to help the crypto market bounce back is advertising. But how does it work?

The Role of Advertising During a Crypto Recession

A number of studies have shown the benefits of maintaining or even increasing ad budgets during a weak economy. Advertisers who kept or increased their ad spending increased sales and market share during and after the recession. This is also true for the crypto industry.

Here are some of the practical reasons why advertising is the key to the revival of the crypto market:

Advertising allows your company to stand out when all the other competitors are laying low. It allows you to reposition your company and prepare for the end of the crypto winter. So when the market bounces back, you’ll come back from a strong and stable position.

During difficult times, advertising can project an image of stability to consumers. This is crucial for crypto investors that rely on market confidence to thrive.

During a recession, the cost of advertising falls. Take advantage of the lower rates to promote yourself to crypto investors.

Bitcoin's price is unrelated to economic fundamentals, but the sentiment is. As long as there is fear of a recession, crypto will struggle to make significant gains. Investors who are willing to take advantage of the crypto winter could position themselves for gains by continuing or increasing their advertising strategy.

Advertising in a recession can boost confidence, not just in crypto but in all other industries as well. With investors willing to ride out the wave and hold on for dear life, others will be less afraid to follow.

Crypto executives and investors are already preparing for the end of the recession. Even the word "winter" implies that there will be spring for those who can endure it.

Wrapping Up

By investing in advertising, you can go full-throttle and focus on the future instead of lagging behind the major players. You’ll be ahead of the game while your competitors are still picking up the pieces and reeling from the recession. No one can control what happens to the crypto market, but you can plan for these difficult events so you can come out stronger than ever.