Cryptocurrency: Will the cryptocurrency winter close smaller exchanges or lead to the acquisition of larger whales?
After Terra’s debacle, Celsius and Three Three Arrows Capital got nervous. This was followed by Vauld suspending the operations. Meta (formerly Facebook) will close its crypto wallet Novi by 1 September 2022.
Even the Indian crypto exchanges are facing massive liquidity pressure, with volumes that have fallen by up to 80 percent since January. The new tax rules add more pain to their ailments.
Ashish Singhal, co-founder and CEO, CoinSwitch, said the crypto industry has several business models. Some are inherently more risky than others, as recent events have shown. Proper execution of business models can create or destroy a company.
He added that the platforms with constant innovation and evolution are likely to succeed more. “We are aware of everything we do, and our business model is simple, so we can buy or sell crypto for a very small fee.”
Market experts said that the crypto market has been dormant since the beginning of the year, and deteriorating macroeconomic factors put more sales pressure, and put more players on the back foot.
Edul Patel, co-founder and CEO of Mudrex, said that smaller exchanges have faced the heat, which led to their closure. In such times, risk assessment and planning are very crucial to maintaining the market, he added.
Patel believes that contraction with few exchanges would be a result of the current series of events, which have passed the tests time and time again. “However, shortages and competition are always healthy for any industry,” he added.
However, the possibility of new players entering the arena in the next bull run should not be ruled out. With the steady and growing crypto adoption and growing awareness, the doors are open to more participants with innovative solutions.
Industry players do not rule out the merger and acquisition game in the coming months. The market shock will see stronger players pick up their weaker rivals in the coming months, they said.
The crypto industry is still in its infancy, and most participants are still centralized institutions, said Johnny Lyu, CEO of KuCoin. However, he added that all stakeholders must learn from the current market conditions.
“Exchanges with gloomy strength to get through tough times may not be able to survive,” he added. “We can expect a number of mergers and acquisitions in the crypto industry in the coming months.”
Interestingly, the basic essence of the blockchain, which was antimonopoly, was to eliminate the concentration of power in limited hands. If the number of players is limited in the spectrum, it will break immediately.
Raj A Kapoor, founder of the India Blockchain Alliance, said that the larger players have deeper pockets and that the smaller fish can be sold at high discounts. The grim reality of an unregulated asset class stares at investors.
“The current scenario reverses the paradigm as an undercurrent of centralization where the power to control will be allocated to a few large companies, and which essentially neutralizes the concept of decentralization in any case,” he added.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of the Economic Times)
