Full effect of the crypto bear market not yet in, no catalysts for reversal in sight: CoinShares CSO

The crypto winter could be extended to the physical winter of Q4 and even early Q1 next year, CoinShares Chief Security Officer Meltem Demirors suggested in a recent interview with CNBC. According to data collected by Demirors, there are no signs that an upside catalyst is in sight, which triggers a rapid improvement from the months-long downward trend.

Liquidity issuance increases the borrowing rate

Meltem Demirors syn com as an evaluation of the current market situation, as the primary cryptocurrency continues to struggle around the $ 20,000 level. However, she did not post a confirmatory stance on bitcoin in recession in the macroeconomic backdrop of Fed-raising interest rates and the euro falling in value against the USD. More pain is ahead of “technology stocks, growth and crypto,” the CSO added.

In the midst of the contagious effect that spreads across the industry when lending companies and stock exchanges fall one after the other, the ongoing uncertainty rests on the extent of such a crisis, as well as on the lack of transparency rooted in some privately owned crypto companies.

“After billions of capital have evaporated overnight, liquidity out of the system, we have not seen the full effect of it because most companies in the industry are not listed, so we do not get the transparency we usually see.”

In a follow-up Twitter thread, Demirors noted that “a massive vacuum” exists in the industry after the collapse of several lending companies, as the demand for such loans from the traditional markets is still high. As the pessimistic sentiment continues to confuse the industry, cryptocurrencies have reduced the amount of capital available for lending.

7 / next, I look at cryptocurrencies + liquidity, and source data from our trading desk or quotes from MMs

The demand for loans has fallen dramatically, which has resulted in compression of returns

on the loan side, the bid for cash has evaporated – by 1-2% on swaps, compared to 17% last autumn

– Meltem Demirors (@Melt_Dem) July 11, 2022

In addition, with the growing need to regulate stable currencies and the ongoing reduction in liquidity in the broader market, Demirors said, “interest rates will rise as liquidity outside the banking system dries up,” meaning access to leveraged positions is better assessed through coin marginal products.

For example, it has been shown in the extremely high borrowing rate for shorting the USDT in the midst of the growing suspicion of Tether’s underlying reserve status.

Tether FUD continues as always. USDC FUD is starting now as well, which is an indication of where we are in the cycle we see that tradfi funds are considering a trade called “the widowmaker” which is short USDT via loans of 10-12%.