In the late summer of 2021, reports from Coinbase showed that a leading cryptocurrency exchange was raising nearly $ 4 billion in a “military chest” in the event of a crypto-winter. In a few months, bitcoinprice twice.
Crypto is known for its volatility, and that’s part of its appeal, but the latest cycle of crypto-ups and downs has led to the market virtually drying up in four years. Comparing the first crypto boom in 2017 with the last, one can find out if another long cold cryptozyme awaits us.
The macro boom of 2017 started with three letters: ICO Recently Launched Etherium Blockchain has inspired many to use technology to create their own deregulated securities.
The promise to “buy the future” and the lack of regulatory oversight have flooded the market with coins for startups with an incredibly high probability of failure.
However, within a few months the liquidity dried up. 2017 could have been an anomaly until the 2020 boom quickly changed the crypto’s position.
Each of the booms was caused by massive speculative hype, but in 2020 the fundamental background was stronger than in 2017. It was a boom that was still largely based on speculation, but between stimulus and institutional adoption major cryptocurrencies gained legitimacy.
A common thesis that supported bitcoin was that because there was a fixed stock of bitcoin, it could act as an inflation hedge, similar to gold. It didn’t take long for that to change during the recession.
Correlation of bitcoin prices with inflation hedging quickly became a fabrication, and prices of bitcoin and other cryptocurrencies were most closely correlated with indices such as NASDAQ and S & P500.
The future of Crypto Winters
Macro prospects for the crypt are not stellar until next 2022. The separation of bitcoin from inflationary assets and the new correlation of prices with indices such as Nasdaq or S & P500, are a reliable indication that the market sees the crypto as a technology stock with high growth. We have a whole article about memes of stock traders and why at this stage of the cycle those with technologically heavy portfolios are more likely to need to rebalance.
Even given the macroproblems from the crypto, the cryptozyme we’re in now, it doesn’t seem like it’s going to be as cold and long as the last cycle.
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