3 reasons why crypto is coming back after Crypto Winter

It’s no secret that the crypto industry is currently going through a rough patch with its market cap losing $2 trillion since November 2021.

But while it will take time, crypto’s recovery will tell a much fuller story. Here are three reasons why the crypto industry isn’t going away anytime soon and will survive this crypto winter.

1. Crypto is becoming increasingly useful

The cryptocurrency market is poised to bounce back because digital assets have clear, long-term benefits. Crypto companies are working diligently to provide more transparent and efficient financial services that have real benefits, such as affordable money transfers, instant settlements and more efficient cross-border payments. Crypto is also beneficial from a verification perspective. Tremendous amounts of money are spent by traditional financial institutions on third-party auditors to ensure that all claims are on the books. Since cryptocurrencies are built on secure and immutable blockchains, they facilitate more secure forms of payment as there is no central point of failure and all transactions are visible on the blockchain.

Emerging markets, in particular, are taking the lead in the grassroots adoption of blockchain technology, as described by Chainalysis’ latest Global Crypto Adoption Index, mainly for remittances and as a hedge against weak currencies.

While there were serious doubts about the scalability of blockchains during previous bear markets, the recent progress on layer-2, zero-knowledge transactions and the development of decentralized finance and its many use cases show that it is only a matter of time before crypto. becomes mainstream and is adopted globally. This adoption starts with economic use cases for the B2B sector and better peer-to-peer transactions and goes all the way to innovative interactions powered by NFT technology like Decentraland’s metaverse.

Crypto’s vision of solving the many problems of modern banking while building a more inclusive financial system is here to stay, and there are good reasons why the ultimate answer will combine a mix of traditional players and new players.

2. Institutional investors are digging in

Institutional investors have noticed crypto’s potential and they want more. With big names like BlackRock and Coinbase working together to expand access to crypto assets for their institutional investors, it’s clear that this asset class has real influence and staying power. Global macro hedge fund firm Brevan Howard has raised over $1 billion for its flagship crypto vehicle. Even JPMorgan has given its wealth management clients access to six crypto funds, which is particularly notable given CEO Jamie Dimon’s reputation as a crypto skeptic and critic.

Recently, Charles Schwab, Citadel Securities and Fidelity Digital Assets announced the launch of crypto exchange EDX Markets, the latest indication of traditional financial giants marking their presence in the world of digital assets. Furthermore, rumors are circulating that Fidelity may soon allow its 34 million retail investors to purchase Bitcoin through the brokerage.

There’s nothing wrong with being wrong, and these moves will help pave the way for more players to realize that despite being in its infancy, cryptocurrency is still an innovative way for consumers to diversify their investments. As more types of traditional financial products – such as options, derivatives and non-deliverable futures contracts – are applied to cryptocurrencies, the capacity of the digital asset market will continue to grow. The same products will first be used by professionals with a clear added value by removing counterparty risk and at the same time ensuring fluid settlement processes and a clear valuation framework.

3. Crypto is being regulated, not banned, by governments that matter

Serious players in the ecosystem are willing to respect compliance and regulation, in part because it will unlock the potential for more mainstream adoption and also help keep bad actors out of the space.

The European Union recently drafted and approved the Markets in Crypto Assets (MiCA) legislation, a critical new set of cryptocurrency regulations set to enter into force in 2024. This landmark legislation, combined with the expansion of existing anti-money laundering laws, positions the EU as the most robust and well-thought-out crypto regulator in the world.

In the US, the regulations lag in development, but the introduction of the bipartisan Responsible Financial Innovation Act sponsored by senators Cynthia Lummis and Kirsten Gillibrand is a step in a promising direction. The Securities and Exchange Commission and the Commodity Futures Trading Commission are still competing for jurisdiction to determine whether crypto assets should be defined as securities or commodities. But at the end of these disputes, there will be clear rules to guide companies built on blockchains, and investors looking to buy more digital assets.

The UK plans to approve stablecoin regulation for payment purposes in the near future, which will provide effective clarity for UK-based crypto companies and consumers. Singapore is another regional hub that early established itself as a safe haven for digital asset innovation, although the country is expected to introduce stricter regulatory measures for retail investors in the future.

Due to the borderless nature of digital assets, countries choose not to ban crypto and instead implement regulatory guardrails to protect investors while ensuring a fertile ground for innovation.

It may take some time, but sensible regulation will greatly benefit market players by targeting cryptocurrency-based crime, creating more stability in the market, and addressing the technical complexities surrounding securing and transacting digital assets.

Final thoughts

Cryptocurrency – and the blockchain technology that underpins the industry – is going through its own moment of refinement. Events like the Terra UST/Luna collapse shook the ecosystem. It highlighted the need for regulations and the importance of building products that provide real value to the community. With institutions asserting the role of digital assets in the wider financial ecosystem, regulators laying the first stones for greater security and wider use of crypto and blockchain technology continuing to scale, there is little doubt that the crypto world will recover stronger than ever from this the bear. the market ends.