Experts’ opinion: the winter of digital currencies will get colder
While some analysts consider the relative stability of the market in recent weeks as a sign of the end of the downward trend; Some industry experts consider the end of digital currency winter and bear market until the end of 2022 far from expected. Examining such data also confirms the opinion that the current trend will continue.
To Report BIncrypto’s Kathleen Breitman, co-founder of the Tezos blockchain, believes that market conditions will worsen in the cryptocurrency winter. He noted that the industry needs to readjust to a higher interest rate world.
In an interview with CNBC on November 2, this digital currency industry expert blamed venture capital companies for creating a bearish market.
A large part of this situation is the result of inflation caused by the influx of cheap money (with low interest rates), and a large part of this situation is caused by risk-taking investors who have tried to pump prices.
Brightman added that the flood of liquidity into the system severely reduced the value of some companies. He mentioned OpenC for example. The trading volume of this NFT market decreased by 88% between September 2021 and September 2022 (September 1400 to September 1401).
He believes that the market is more focused on the overvaluation of digital currency companies instead of paying attention to the real price of assets.
Tezos has largely lost its credibility among cryptocurrency traders and investors. The once bullish proof-of-stakes asset has now lost 84.5% from its all-time high and now sits at #43 on the market with a market cap of $1.2 billion.
Winter will continue
According to Brightman, the increase in interest rates can also prolong the winter of digital currencies; Because it is likely to make the use of cash more attractive than other assets.
Binance CEO Chang Peng Zhao also commented on the cryptocurrency winter at the Web Summit in Lisbon. The ever-optimistic billionaire said that digital currencies are the only stable assets in this ever-changing environment.
He also commented on the correlation of digital currencies with stocks of technology companies and the market’s reaction to the increase in interest rates by the Federal Reserve.
When the Fed raises interest rates and the stock market falls, people want more cash and therefore sell their cryptocurrencies; Because the user base is still highly correlated with the stock market.
The prospect of such a market
Earlier this week, analytics platform Glassnode compared the current cryptocurrency winter to previous bear markets. The company believes that Bitcoin is forming a price floor and its trend has similarities with past bearish patterns.
Now that other financial losses have been inflicted on the market, the last remaining piece of the puzzle is time and ultimately investor apathy, the company added.
The bear market of 2015-2014 and the digital currency winter of 2018-2019 have also experienced similar conditions. The current cycle has been building a floor for only four months, so it is likely to continue until 2023; Especially if interest rates continue to rise.
A day after the Federal Reserve raised interest rates by 0.75 percentage points on Wednesday, the cryptocurrency market saw a small decline. In fact, as the accumulation phase continued, the total market value reached $1 trillion.