The hope that the crypto winter will soon thaw looks increasingly distant, CEOs say Financial newsas many prepare for the bear market to extend well into 2023.
Jean-Marie Mognetti, CEO of CoinShares, said he expects the industry to “suffer for at least 18 months.”
However, he added that small improvements could start to appear by August next year. “Crypto is not for the faint of heart,” he said.
Crypto prices have been on a downward slide since the collapse of stablecoin terraUSD and its associated cryptocurrency luna triggered a broader market crash earlier this year.
They were dealt a further blow after data showed US inflation picked up faster than expected in September, dampening hopes that the Federal Reserve will slow the pace of its planned rate hikes.
Bitcoin fell more than 4% on October 13 to below $18,400, nearing its annual low and representing a 61% drop year-to-date. The world’s largest cryptocurrency by market capitalization has hovered between $19,000 and $20,000 since early September.
Analysts say cryptocurrencies – which have become more correlated with the broader stock market this year – are unlikely to break away from their current range until the Fed starts cutting interest rates.
‘Test Period’ for Crypto Firms
The sector has already seen a number of companies file for bankruptcy or insolvency in recent months, partly as a result of falling valuations, including lender Celsius, broker Voyager Digital and hedge fund Three Arrows Capital.
Some are concerned that the wave is not yet over. This month, South Korean crypto investment firm Blockwater defaulted on a $3.4 million loan to lender TrueFi.
Marcus Sotiriou, analyst at GlobalBlock, said it is “yet another example of chaos caused by centralized entities taking too much influence and risk”.
A boss told me that United Nations he was aware of several large loans maturing in the last quarter, which could be make-or-break moments for major market players.
Serhii Zhdanov, CEO of crypto exchange Exmo, said there are “no signs of a turning point in the near future. Growth looks unlikely for the crypto market in the last quarter.”
He added: “In general, this crypto winter is a testing period. The uncertainties test the stability of all market players and identify weaknesses in the sector.”
In the midst of the turmoil, traditional financial players have stepped into the market for digital assets.
Most notable is BlackRock, which announced a partnership with Coinbase earlier in 2022 and launched a spot bitcoin private trust for institutional investors.
Adrien Treccani, CEO of Metaco, a crypto manager that has partnerships with Citigroup, Société Générale and BNP Paribas, said the bear market is “completely irrelevant” to institutions.
“They may even be happy, because they see this as another opportunity for them to catch up and position themselves as the saviors of the markets.”
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