The winter of crypto-currencies is here, but it will be a “warm winter,” according to a crypto editor.
Bitcoin may have fallen more than half from its all-time highs, but “there is so much more to it,” said Edith Yeung, a general partner at Race Capital.
“In a way, the warm winter is going to push everyone out who is only looking for short-term gains,” she told CNBC’s Street Signs Asia last week. , emphasizing that cryptocurrencies are a long-term game.
The term crypto winter refers to an extended period of depression in the prices of digital coins in the market.
Cryptocurrencies have lost around $1.9 trillion in value since the peak of a massive rally in 2021.
Bitcoin, the world’s largest digital coin, is about 68% off its all-time high of nearly $69,000 hit in November.
Ms. Yeung said she remains bullish on digital tokens for the long term because their appeal lies in the fact that “crypto is very much a Web3 thing.”
Web3 has become a buzzword among those in the crypto industry. Its proponents say it’s the next generation of the internet, which will be “decentralized” and not owned by a few big tech giants.
According to its proponents, crypto and blockchain technology could play an important role in this. For example, a Web3 service can run on a particular blockchain such as ethereum or solana. Users might be required to hold tokens associated with these blockchains in order to use a particular service or even own that application or business.
“I think there is a whole generation of Internet users [qui] really believes that ‘you can’t monetize my data anymore…the internet should belong to us,’” Yeung told CNBC.
“That’s why there’s such a push with crypto because the ownership of ethereum or solana is really the user who owns that piece of token, which is just a piece of this internet. »
The Problems of Crypto
Even though Yeung hinted that it will be a “hot winter” for the cryptocurrency market, the difficulties faced by the sector so far are unprecedented. See also: Dogeliens and Dogecoin: The meme tokens that are the next cryptocurrencies to explode in 2022.
The nearly $2 trillion plunge in cryptocurrency value was triggered by the sudden collapse of an algorithmic stablecoin called terraUSD, which saw its sister token luna become worthless. Several societys of cryptocurrencies, including the hedge fund Three Arrows Capital, now bankrupt, were heavily exposed to terraUSD.
Meanwhile, loan companies like Celsius, which took risky trade bets, faced liquidity problems and also filed for bankruptcy.
These issues have led to contagion throughout the cryptocurrency industry.
James Butterfill, head of research at CoinShares, is one of the skeptics of the term “warm winter”. The crypto winter has been “brutal,” he says, citing the fall of Three Arrows and the drastic drop in bitcoin prices.
“Bitcoin prices fell 74% from peak to trough at one point – this closely matches the 83% decline seen in 2018 and should be taken in context that the market is significantly larger and has a base of ‘much wider investors now than he had in 2018,’ Butterfill told CNBC in an email Monday.
The biggest current challenge for crypto lies in the uncertainty surrounding the Fed’s monetary policy and whether the central bank will slow the pace of interest rate hikes, said Yuya Hasegawa, crypto market analyst at the Japanese crypto exchange Bitbank.
Markets are anticipating Federal Reserve Chairman Jerome Powell’s speech on the Fed’s next policy moves at the Jackson Hole summit on Friday. Any slowdown in the pace of rate hikes could be positive for crypto markets, Hasegawa said.
“I think the Fed will have to gradually face some signs of an economic slowdown and respond to them soon, so my medium-term outlook is somewhat optimistic,” Hasegawa said.
At the same time, Mr. Butterfill pointed out that it is difficult to predict the Fed, as the economic picture remains mixed.
“A change in the attitude of the Fed could be very favorable for bitcoin prices. Just as Fed policy initiated this bear market in December/January, a less favorable stance could prompt it to break out of its $20,000-$25,000 range,” he said.
Bitcoin versus Ether
Ether, the second largest cryptocurrency in the world after bitcoin, is the native token of the ethereum blockchain. This may interest you: Should you invest in Tezos (XTZ) at the current price?. Sol is the native cryptocurrency of solana, a public blockchain that supports decentralized financial applications aimed at recreating traditional financial systems, such as banks and stock exchanges.
Asked if ethereum has stronger fundamentals than bitcoin, Race Capital’s Yeung replied that the two cryptocurrencies are “very different.”
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“Bitcoin is digital gold,” she pointed out, noting that ethereum and solana are akin to “decentralized cloud services” where applications are built on the blockchain network but run by “many, many people “. See the article: Cronos (CRO), Chainlink (LINK) and Mehracki Token (MKI) Resist the 2022 Bear Market.
Ethereum and Solana are blockchains that position themselves as a platform on which developers can build applications. Bitcoin, on the other hand, was created to be a payment service and is therefore different from Ethereum and Solana.
Ether has so far outperformed bitcoin massively since the two digital currencies bottomed out in June, due to a much-anticipated ethereum network upgrade.
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