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Crypto winter risks falling into ice age

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After the crash earlier this year, the crypto industry’s most popular token fell asleep, amateur investors lost their love for the once-thrilling asset class, and big funds decided to distance themselves.

The price of Bitcoin, the largest token, has been hovering around $20,000 since August, after peaking near $70,000 a year ago. Ether, the second largest, has failed to rise since the environmental reforms in September. Bitcoin’s average annualized volatility is the lowest since October 2020, according to analytics platform CryptoCompare.

Initially, the decline in token prices wascrypto winter— one of the market’s regular sell-offs. But the length of this monotonous phase, combined with the loss of thousands of jobs in the sector in recent months, makes this a rather ice-age, grand theory that will be the next fuel for rallies. does not appear.

“The silence in the story is deafening,” said Edmund Goh, head of trading at crypto broker B2C2. “Eventually the story will come. [break the impasse] — perhaps inflation or a big regulatory announcement. It may be completely unexpected. ”

CoinShares, a digital asset investment and trading group, describes this as a “period of indifference.”

In part, since it was revealed almost a year ago that U.S. interest rates would need to rise rapidly to deal with sticky inflation, cryptocurrencies have become a favorite among other highly speculative assets. I am suffering from the same disorder as my class.

The US tech-heavy Nasdaq stock index has fallen 30% over the past year. This is his one of the worst performances in developed markets.But his nearly 70% drop in Bitcoin over the same period was steeper, with May’s collapse Token Luna and the related so-called stablecoin terraUSD lost about $40 billion to investors, further shaking confidence in cryptocurrencies. The industry’s market capitalization has shrunk from $3.2 trillion to he less than $1 trillion.

Exchanges like Coinbase and Gemini shut down, leaving thousands out of work big section Crypto hedge fund Three Arrows Capital and lending platform Celsius network was forced into bankruptcy. Prominent senior executives across the industry have also resigned, including Kraken’s former industry CEO Jesse Powell, MicroStrategy’s Michael Saylor, and Celsius’s Alex Mashinsky.

The flat market is discouraging speculators and leaving the market to long-term bulls. In the industryHodor-ers” (short for Holding On for Dear Life) seems to do just that. Morgan Stanley estimated this week that his 78% of all Bitcoin denominations have not been used in any transactions in the past six months. This is a record amount.

Aside from a tougher interest rate environment, some of the key arguments underpinning cryptocurrencies have been debunked. El Salvador’s experiment with bitcoin as the official currency has leveled off and the cryptocurrency has failed as a hedge against inflation. Prices fell even as inflation in advanced economies approached 10%.

Line chart of flagship crypto token prices ($) showing bitcoin price plummeting from last year's peak

“[Bitcoin] Bank of America’s digital asset strategist Arkesh Shah said it had not worked as an inflation hedge or store of value for the past few years.

Even a successful shift from energy-intensive cryptocurrency mining practices to carbon-light alternatives has not helped lift the mood. merge, hop on a greener blockchain. The move has reduced the network’s energy usage by about 99%, but the value of Ether, the token associated with the blockchain, has yet to rise.

Other people’s pain may not be over yet. Cryptocurrency miners, who use computers to solve puzzles in exchange for tokens, are also feeling the pressure. They need to keep spending more and more money on energy, but the tokens they are rewarded with are declining.

U.S.-listed mining company Core Scientific warned it could run out of cash by the end of the year and need to file for bankruptcy, sending its shares down more than 70% this week. In its regulatory filings, the company blamed low Bitcoin prices, rising electricity prices and a lawsuit with bankrupt lending platform Celsius.

Line Chart Showing Ether Price ($) Since last year's bull market, Ether's price has also plummeted.

Some remain optimistic even as values ​​collapse. Dan Ives, managing director of Wedbush Securities, said, “This has been a tough time for risk assets, including cryptocurrencies…but the asset class stays here.” Chains and more use cases are important for cryptocurrencies going forward.”

In August, Coinbase announced a deal with BlackRock to give asset management clients access to digital assets. potential watershed moment For the crypto mainstream hopes. The wealth management giant said it “still has great interest” from institutional investors despite the market downturn.

Nasdaq, mastercard and bny melon It has also announced crypto services in recent weeks, confirming the argument that institutional interest in digital assets remains despite this year’s crash. It may take some time.

“The underlying fundamentals of cryptocurrencies either do not exist or, if they do, have not yet been identified,” said Charlie Cooper, managing director of blockchain firm R3. “I find the idea of ​​suddenly seeing a spectacular bull market before the broader economy gains a foothold is fantastic.”

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