Analysts expect more negative news for crypto and more suffering for crypto-related projects
Bitcoin began a consolidation around $22,000 – $23,000 since a couple of weeks ago and has eased investors’ mood to such an extent that it invites confidence and the belief that the worst is behind us. The wave of bankruptcies in May and June went down in history as the ‘Lehman moment’ of the cryptoasset market, although experts warn that no one is safe in a sector completely exposed to economic ups and downs, as they are not few .
Digital tokens enter a quarter there dark clouds are on the horizon which will be a storm in the fall. Central banks’ aggressiveness to contain inflation, which will soon reach double digits in the UK and US and reached more than 10% in Spain, and their lack of success, is leading the most important countries into a recession which is expected to last as long or longer than the crisis in 2008, and in this context, risk assets will have a particularly difficult time.
“I think the more reasonable scenario is to expect more negative news: interest rates still have room to rise, and that will drain even more liquidity into the ‘crypto’ market. Several projects are likely to suffer in that environment,” commented Ramiro Martinez-Pardo, CEO of HeyTrade, in a conversation with ‘Bolsamania’. A recent note from Bank of America also warned of this. Experts from the US unit stated that the digital The currency market appears to have already discounted many risks, but recession in an environment of ever-higher prices and ongoing inflation will take its toll on cryptographic tokens.
Whether this connection can lead to a new wave of bankruptcies and company closures such as those experienced by Terra, Celsius or Three Arrows Capital, to name a few, Martínez-Pardo asked to distinguish between “project-specific reasons and the environment that affects the entire crypto universe.” “The industry itself called for a correction after very strong increases in recent years and it is normal to see a drop in the prices of the major coins,” he explained.
“The consequence is that the projects that are most vulnerable when funding and volume are reduced unable to survive: in some cases it may be that they were non-viable projects from the start; in others, a series of very specific circumstances combined with a lack of funding from investors end up dooming them. In that sense, it is the same thing that has happened so many times, both in the crypto sector and in so many others,” he noted.
“We have lived through similar cycles on other occasions,” the expert said while stressing that “confidence will return when investors’ profit prospects outweigh their perceived risk.” “It will largely depend on the macro environment and how much central banks end up raising interest rates in the end: the less liquidity, the more the crypto world will suffer.”
REGULATION
When asked if the regulatory wave that we see arriving in the EU and the US, with some urgency, is the direct consequence of this situation, Martínez-Pardo stated that “it may be” so, although he pointed out, ” part of the regulation was already under preparation for a long time. Regulation was urgent both with and without this “needle stick”.
The United States is on the verge of passing legislation to regulate cryptocurrencies that would authorize the Commodity Futures Trading Commission (CFTC) to be the default regulator for cryptocurrencies. In the EU, MiCA is already taking shape with a first agreement on a law on crypto-asset markets that is “among the most comprehensive proposed globally”, assessed HeyTrade’s CEO. “Just like the ecosystem, it wants it to constantly evolve to maintain its relevance and currency“, he concluded.
