What about the crypto market? After a 70 percent drop, analysts predict a mild winter

What has happened in the market so far?

Although Yeung suggested that this will be a mild winter for the crypto market, the market events of the past period have been unprecedented:

The nearly $2 trillion drop in the combined market value of cryptocurrencies culminated in the sudden collapse of an algorithmic stablecoin called terraUSD, rendering its sibling token, luna, worthless.

Image source: Coinmarketcap

and the collapse crushed companies like an avalanche, with lending companies such as Celsius facing liquidity problems and not long after declaring bankruptcy as well.

Several cryptocurrency firms, including the now-defunct hedge fund Three Arrows Capital, had large exposures to terraUSD. Portfolio also reported on the consequences and the chain reaction. The liquidation of Three Arrows Capital also extended to crypto brokerage Voyager Digital, as well as smaller firms such as Hong Kong-based trading firm 8 Blocks Capital.

Opinions vary

James Butterfill, head of research at CoinShares, is one of the skeptics of the mild winter forecast. In his opinion, even the current crypto market winter was brutal, he said, referring to the fall of Three Arrows and the drastic drop in the price of bitcoin.

At its low point in June, bitcoin was down about 74 percent from its previous peak – roughly the same as the 83 percent decline seen in 2018, and should be seen in the context of the fact that the market now has a significantly larger and much broader investor base than in 2018. in

Butterfill told CNBC in an email Monday.

The biggest challenge for the crypto market at the moment is the uncertainty surrounding the Fed’s monetary policy and whether the central bank will slow down the pace of interest rate hikes, said Yuya Hasegawa, crypto market analyst at Japan’s Bitbank, adding that any slowdown in the pace of interest hikes is positive. can be for crypto markets.

I think the Fed will soon have to gradually confront and address some signs of an economic slowdown, so my medium-term outlook is optimistic

Hasegawa said.

A less stringent monetary policy move could significantly support bitcoin’s rise. Just as the Fed’s tight monetary policy set off this bear market in December/January, a different, less hawkish approach could push the market to break out of the $20,000-$25,000 trading range

Butterfill said.

Bitcoin vs ethereum

It is difficult to get a clear answer to the question of whether ethereum has stronger foundations than bitcoin.

Bitcoin is a kind of digital gold, while ethereum and solana are similar to decentralized cloud services, where applications are built on the blockchain network, where many, many people operate them.

Yeong pointed out

Ethereum and solana are blockchains that position themselves as platforms on which developers can build applications. Bitcoin, meanwhile, was created as a payment service, which is why it differs from ethereum and solana.

Ether has outperformed bitcoin in recent weeks, largely due to the freshness of the ethereum network and the interest surrounding it.

On the other hand, the price of bitcoin could not significantly rise from the June low, and the increase stalled at the level of $25,000.

The prospects

Yeung said he remains optimistic about digital tokens in the long term, mainly because he says their appeal lies in the fact that this form of cryptocurrency is really about Web 3.0.

According to some, crypto and blockchain technology can play a big role in this, as a Web 3.0 service can run on that blockchain, ethereum or solana, for example. And users must have tokens linked to these blockchains in order to use a particular service, or even to have ownership in that particular application or company.

I think the internet [felhasználóinak] you have a whole generation who really believe that you can’t monetize your data anymore and that the internet should be owned by the users

– said Yeung to CNBC, then added that he thinks cryptocurrencies are so popular because

because owning ethereum or solana actually means that the user owns that piece of token, which is actually “just” a piece of the internet.

However, before you dive into the bitcoin business by selling your savings and half of your house, you might want to keep your cool and think about the current arguments against cryptocurrency. The global economy is currently in a very different state than it was during previous cryptocurrency cycles. There is gnawing inflation and rising interest rates all over the world, and there is also the unpredictability of the Russian-Ukrainian war, and perhaps most importantly, the energy crisis that has a decisive effect on the miners’ mood.


Cover image: Getty Images

Source: Portfolio.hu – Üzlet by www.portfolio.hu.

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