2022 is coming to an end, and our staff at NewsBTC decided to launch this Crypto Holiday Special to provide some perspective on the crypto industry. We will be talking with multiple guesses to understand this year’s highs and lows for crypto.
In the spirit of Charles Dicken’s classic, “A Christmas Carol,” we’ll look into crypto from different angles, look at its possible trajectory for 2023 and find common ground amongst these different views of an industry that might support the future of finances.
We kicked us this special with an institutional guess, asset management firm Blofin. In early December, they wrote an essay called “Catastrophe, Survival, and Evolution: Writing After November’s Crypto Markets” which inspired this series.
Blofin: “One of the apparent signals is that in December 2022, monthly crypto spot volumes have returned to 2020 levels.”
In their essay, the firm argues that the crypto industry has been heavily impacted by the collapse of hedge fund Three Arrows Capital, FTX, Terra (LUNA), and others. These events forced crypto investors into inactivity as their confidence in the sector shattered.
Blofin: “There is no doubt that crypto is the future direction of finance. Still, a series of previous events have shown that if investors’ money cannot be protected, they will eventually give up the crypto market (…).”
But there is light at the end of the tunnel for Bitcoin and other cryptocurrencies; albeit a long recovery is ahead, the nascent asset class will emerge from its ashes. For Blofin, the crypto industry is on the brink of a critical evolution. Once completed, the sector will rise again on the back of new institutional support. This is what they told us:
Q: What’s the most significant difference for the crypto market today compared to Christmas 2021? Beyond the price of Bitcoin, Ethereum, and others, what changed from that moment of euphoria to today’s perpetual fear? Has there been a decline in adoption and liquidity? Are fundamentals still valid?
A: The most significant difference comes from two aspects: liquidity and investor confidence. In 2021, the liquidity of the crypto market is still sufficient, and the impact of the liquidity contraction in the risk asset market has not yet fully manifested. In 2022, with the Fed’s (U.S. Federal Reserve) continuous interest rate hikes, Luna’s collapse, 3AC Capital’s (Three Arrow Capital) bankruptcy, and chapter 11 of the FTX exchange, the…
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