Has ‘Crypto Winter’ arrived as Bitcoin, Ether prices fall?

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On Tues­day, bot­tom buy­ing helped the mar­ket sta­bi­lize a bit into U.S. trad­ing hours. 

Investors, still smart­ing from the Ter­ra-LUNA deba­cle that wiped off bil­lions of dol­lars in investor wealth, sold off cryp­tocur­ren­cies ear­li­er in the week amid a mar­ket slump over expec­ta­tions that the Fed will act faster to tame inflation.

Forkast’s Dan­ny Park and Joel Fly­nn spoke to a cross-sec­tion of mar­ket par­tic­i­pants to gauge the sen­ti­ment in the market. 

The inter­views have been edit­ed for lan­guage and brevity. 

Dan­ny Park: Has a “Cryp­to Win­ter” arrived in your opinion?

Toya Zhang, CMO, Bit.com: The cryp­to win­ter has come and it will last for a while. Over US$200 bil­lion has been wiped out from the cryp­to mar­ket. Con­fi­dence and for­tunes need to be rebuilt. Poli­cies have to be formed. These take time. 

The crash has also exposed the weak­ness­es of some of the exist­ing cryp­to busi­ness­es, for not being able to resist these adverse con­di­tions. It is not the first time, nor will it be the last time of a glob­al-lev­el eco­nom­ic down­turn that the cryp­to mar­ket has been hit ter­ri­bly. After the UST crash, every algo­rith­mic sta­ble­coin will be test­ed as is the case with USDD.

It is the time for the stake­hold­ers in this indus­try to strength­en their prod­uct offer­ing and busi­ness mod­els. Pre­pare for the spring and pick up and gear up for the next winter. 

Jeff Mei, CMO, Chain­Up: I think this is just a start and each cryp­to win­ter is dif­fer­ent. The one com­ing our way has the poten­tial to be a turn­ing point for our indus­try, as now even big play­ers with high val­u­a­tions such as Coin­base and Cel­sius are in dif­fer­ent kinds of trouble.

Ben Caselin, VP, Glob­al Mar­ket­ing and Com­mu­ni­ca­tion, AAX: 

This crash is not a sud­den thing, it’s been hap­pen­ing over the past six months, actu­al­ly. Mar­kets haven’t been doing so well. 

There’s the macro­eco­nom­ic fac­tors, the rate hikes, the reces­sion­ary type of envi­ron­ment that we see now. There’s the risk-off kind of atti­tude from the big­ger investors. There’s gen­er­al FUD (fear, uncer­tain­ty, and doubt) in the mar­ket. But this is all just look­ing at the price. 

Price is just one of the indi­ca­tors, an impor­tant one, but I don’t think we need to look at this from too much of a short-term per­spec­tive. There’s a lot of stuff happening. 

So far for USDC, despite all the FUD for many years has actu­al­ly been quite okay. There’s a need for sta­ble­coins and I wouldn’t write us off right now. It’s just that there’s some fear around algo­rith­mic sta­ble­coins at the moment. 

Well, here’s the thing, right? Yes, it could be win­ter. But then there’s also cli­mate change. And so sea­sons are upset. They’re dif­fer­ent. They oper­ate dif­fer­ent­ly. Maybe the win­ter will be over very soon. 

Park/Flynn: Cryp­to mar­kets are reel­ing, hit­ting lows that we’ve not seen in quite some time. What’s your opin­ion on whether we’re any­thing close to the bottom?

Ben­jamin Stani, Busi­ness Devel­op­ment & Sales Direc­tor At Matrixport: 

It’s very hard to pin down any lev­els here because we’ve bro­ken through many impor­tant resis­tance lev­els. And at the moment what’s going on is there’s major liq­uid­i­ty stress. So you don’t know which play­ers are sol­vent yet. You don’t know how long this drag on liq­uid­i­ty will continue. 

I always say that, but espe­cial­ly around these times and invest in assets, that you have a very strong view that they will have val­ue in the long run and do your dol­lar-cost aver­ag­ing into these assets.

Mei: Bit­coin has bro­ken down from the hor­i­zon­tal chan­nel which it had been trad­ing in since the begin­ning of May and is now trend­ing down­wards at lev­els that were seen dur­ing Decem­ber 2020. Ether’s trend is even weak­er, hav­ing fall­en for 11 con­sec­u­tive weeks. The lev­els we are at right now cor­re­spond to the highs that were record­ed in 2018.

Park/Flynn: What is your view on when cryp­to mar­kets are like­ly to recover?

Mei: The cycli­cal­i­ty of cryp­tocur­ren­cies is strong­ly cor­re­lat­ed with the halv­ing of BTC min­ing out­put. The next halv­ing will be in the first half of 2024, and the out­put will drop from six-fold to three-fold BTC. Judg­ing from past expe­ri­ence, the arrival of the next pro­duc­tion cut is the time to start a new round of market.

Stani: You don’t know how long this drag on liq­uid­i­ty will con­tin­ue. I expect mar­kets to con­tin­ue to be very volatile in the near term. And for peo­ple who have not expe­ri­enced the cryp­to bear mar­ket in the past, these mar­kets can come very sharp and can last much longer than you would expect, so I would strong­ly advise any­body invest­ing in cryp­to to be extreme­ly care­ful with leverage.

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