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The head of business development of Dvision Network described his vision of the trends of the crypto industry in the coming years, and also spoke about the promising directions of the market.
In recent weeks, the capitalization of the cryptocurrency market has decreased significantly and fell below $ 1 trillion. The largest crypto assets are testing important levels of support, and echoes of the recent collapse of the Terra ecosystem are still affecting the market.
The editors of crypto-daily.news talked with the head of business development of Dvision Network Bobur Muidinov about world and Russian market trends, crypto winter and promising areas of the industry.
In recent weeks, the cryptocurrency market has been ruled by a “bearish” trend. Has a new crypto winter arrived?
After bitcoin dropped to $20,000, the community recognized that we finally got to the bottom of the crypto winter. However, talk of a potential downtrend began at the end of 2021, after Bitcoin formed a very dangerous pattern – a “double top”. Although the community began to talk about the bearish trend only at the beginning of the second quarter of 2022, many analysts already at the time of the formation of the pattern came to a consensus about the arrival of the crypto winter. This sign was a clear indication of the potential beginning of a deep correction and the transition to a “bearish” market.
The recent news of cuts at Coinbase and Gemini, the downgrade of BlockFi’s IPO, the collapse of the multibillion-dollar Terra project, and the liquidation of the positions of one of the largest institutional investors in 3AC not only indicate the onset of the deepest bottom of the crypto winter, but also indicate that this period may drag on until the next halving of Bitcoin in 2024. Crypto assets may continue to fall due to the onset of stagflation and the economic crisis at the global level against the background of the upcoming recession.
How will the further tightening of the monetary policy of the US Federal Reserve affect the global crypto market?
– After the Announcement by the Fed about the beginning of the use of monetary policy tightening tools on June 1, 2022, there was a danger of a further drop in the price of crypto assets. On June 16, the Fed finally decided to raise the key rate to 75 basis points, which immediately affected the market.
Bitcoin fell to $ 20,000, thereby bringing down the capitalization of the industry to less than a trillion dollars. The previously seen bullish pattern in the market from mid-2020 to the end of 2021 was directly provoked by the Fed’s soft monetary policy due to the infusion of a huge amount of liquidity into financial markets, the lack of high yields on bonds and other reliable assets, as well as the development of appetite among investors.
When we talk about the application of QT tools, the picture moves the other way around. Investors lose their appetite for risky assets, begin to keep money in safer assets (bonds and gold), in order to protect their fixed capital and, at best, beat inflation. It has long been clear that in QT financial risks remain without liquidity and the S&P 500 previously systematically demonstrated negative indicators in QT. Due to the presence of a positive correlation between crypto assets and the stock market, the former will certainly suffer due to further tightening of the US Federal Reserve’s policy.
How has the collapse of LUNA and UST affected the industry? What lessons can investors learn from this situation?
For me personally, the example of the collapse of the Terra project is comparable to the fall of Lehman Brothers at the height of the financial crisis in 2008, after which the global recession began and there were very noticeable economic complications in all markets. The difference is that in the collapse of Lehman Brothers, the U.S. made a difference and poured in up to $700 billion through QE to somehow mitigate the fall of one of the most strategically important investment banks.
In the case of Terra, no regulator, no organization in the world intervened in the process to mitigate the fall of such a large-scale project, somehow protect investors and compensate for their losses. Here the factor that in the crypto industry each investor is responsible for his own risks works more. Even with the loss of 100% of the invested funds, no one will intervene and no one will be punished for it.
If we look at this situation from the point of view of protecting the interests of investors, it is imperative to adopt certain regulatory and legal frameworks for tracking projects with a huge capitalization, especially in relation to stablecoins, to conduct a report on a quarterly basis to make sure that there are real assets to ensure the binding.
Some analysts believe that the crypto winter may drag on until 2025ode, taking into account the cyclical nature of the cryptocurrency market and the impact of Bitcoin’s halving on it. What are your predictions?
– It is not so easy to predict the development of events – markets depend on macroeconomic factors that can initiate a chain of events that can cause a “bullish” market. Since such macroeconomic events are difficult to predict, bitcoin’s halving, which will take place in early 2024, is the obvious starting point of the next bullish trend, which will last until the end of 2025.
If bitcoin begins to be used as a means of payment in a large number of countries and bitcoin exchange-traded funds (Bitcoin ETFs) finally receive the approval of regulators of the largest jurisdictions, then this may also affect the early arrival of the bull cycle. In addition, it is worth considering historical data that indicate that on average, bear markets last up to 9-10 months, while bull markets last 3-4 times longer.
How will the current situation on the market affect the trend directions in the industry: play-to-earn, walk-to-earn, NFT?
— All these projects are extremely speculative and risky ventures, and with bear markets, even the leaders of the direction can fail. For example, in early March 2022, there was a strong hype on STEPN, but the excitement did not last even six months.
Shortly before the price of GST fell to $0.30 and depreciated the NFT sneaker by 90%, I explained what could trigger the fall and collapse of the STEPN project with the move-to-earn mechanism (play-to-earn and move-to-earn are identical concepts). I predicted that the bear market could lead to an outflow of users on this platform and greatly affect the arrival of new investors, which will affect the sales of NFT sneakers and further reduce the value of the token. And that’s what happened.
Given the unstable geopolitical background, is it worth waiting for the outflow of users from centralized platforms to decentralized exchanges and applications?
Geopolitical risks always knock down all markets, including the crypto market, due to instability and fear of escalation of events at the global level. All kinds of geopolitical turbulence have historically put pressure on financial markets. They force investors to dump their assets and move into more stable and less risky assets to store their capital – market sentiment completely changes the mood of investors and makes them risk-averse.
Given that crypto assets are one of the riskiest assets, then first of all investors sell them from their portfolios and leave the crypto market. This leads to a massive outflow of users, both from centralized and decentralized exchanges. This can even be tracked by the falling trading volume on CEX and DEX, where the main coins, although they keep a high level of trading volume, but in altcoins it almost disappears.
What are the features of the Russian cryptocurrency market in the new geopolitical paradigm?
The beauty of blockchain is that no matter how much you control the technology, there are always ways to circumvent all prohibitions and laws in order to conduct transactions. Russian investors have invested in crypto assets, and continue to do so. Even though Binance has previously announced that it will restrict access for Russian citizens.
I join the words of the CEO of the crypto exchange Kraken: the blockchain technology was created in order not to depend on central systems and be independent of geopolitics. Most likely, venture investors and project leaders who come from Russia or the CIS countries suffered more.
Many projects are reluctant to accept money from Russian venture capital funds, as they do not want their business to be somehow connected with politics. It becomes much more difficult for project representatives to attract investment in the project for the same reason. I hope that this paradigm will not last long, because the blockchain industry should be as agnostic as possible and promote the ideology of decentralization.
What areas of the cryptocurrency industry do you consider promising in the next 2-3 years? What should beginners in the market pay attention to?
The market will gradually move into a new phase of its development, and there will be much fewer projects with meaningless concepts, and more leaders who have built business in bear markets through difficulties – they will lead the market in the next growth cycle.
We will see little but very sustainable development in blockchain applications that will set the trajectory for the further development of the entire industry. Most likely, it will be necessary to pay attention to new infrastructure projects that try to solve market problems, are focused on users and develop a convenient and popular service among community members.
#crypto #winter #halvig #Bitcoin