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Experts’ opinion: the winter of digital currencies will get colder

نظر کارشناسان: زمستان ارزهای دیجیتال سردتر خواهد شد

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 world with higher interest rates.

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 the situation was created by risk-averse investors who tried to pump prices.

Brightman added that the flood of liquidity into the system severely reduced the value of some companies. For example, he mentioned OpenC. 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. A once-promoted proof-of-concept asset has lost 84.5% from its all-time high and now sits at No. 43 with a market cap of $1.2 billion.

Winter continues

Rising interest rates could also prolong the cryptocurrency winter, Breitman says, as 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 Lision. The ever-optimistic billionaire said that cryptocurrencies are the only stable assets in this ever-changing environment.

He also weighed in on the correlation of digital currencies with tech stocks and the market’s reaction to the Federal Reserve’s interest rate hike.

When the Fed raises interest rates and the stock market falls, people will 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 that the trend is similar to the bearish patterns of the past.

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.

Experts' opinion: the winter of digital currencies will get colder

A day after the Federal Reserve raised interest rates by 0.75 percentage points on Wednesday, the cryptocurrency market experienced a small decline. In fact, as the accumulation phase continued, the total market cap reached $1 trillion.

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