Are we Still in a Bear Market?
The crypto landscape lies buried under a crystal layer of cold.
The natives are still around though, moving purposefully, and dressed for the weather.
In this stark crypto winter, we’ve seen the total cryptocurrency market cap sink from a high of nearly $3 trillion USD to its current value just below the $1 trillion mark in a hellish avalanche fall that has left many bruised from the descent.
But has the bottom come in, and are there signs of new growth hidden under the snow?
To have any hope of predicting the future we must first understand how we’ve got here.
Collapsing Crypto – Part 1: Macro Forces
It appeared for a time in the financial turbulence of the Covid pandemic that cryptocurrency, particularly market-leader Bitcoin would decouple from the dollar and play a role similar to gold, being viewed as a safe holding. There were in fact many significant portfolios built during the growth in crypto seen during the first Covid lockdowns.
But crypto could not hold up forever against the relentless global market forces at work in recent months, the impact of the ongoing Ukraine war and disruption to energy, supply chains and the cost of living, all on the back of the removal of government Covid subsidies.
The technologies present in the DeFi sphere are still some years off from full maturity, broad adoption, and from proving their uniquely transformative use cases to the wider world. This has made them particularly vulnerable to the effects of wider economic forces.
Collapsing Crypto – Part 2: Internal Forces
Some of the market disruption seen in crypto this past year has been the result of serious issues with institutions native to cryptocurrency itself – including the collapse of huge ventures within the space, most notably LUNA’s downfall but also, those of major hedge funds such as 3AC.
Ethereum founder Vitalik Buterin recently commented to Bloomberg that such events as the fall of LUNA were good at “exposing weaknesses”. The argument can be made that the elimination by market forces of such a project will help to make the space stronger and more securely designed in future.
The Short Run
Still, there’s no sugar-coating it – in the immediate run, it doesn’t look good. Macro forces continue to apply downward pressure on crypto, which is also vulnerable to further rate increases from the US Federal Reserve, or even mention of such from Chairman Jerome Powell.
Concerns also surround operations costs for Bitcoin miners as Bitcoin sinks below the contested price point of $20,000 amidst continued downward pressure. The Crypto Fear & Greed Index remains in the zone of Extreme Fear.
The Blockchain Bull Case
How long crypto winter continues will depend on much in the macro environment.
This sizeable reset is testing the key players in the space, as well as weeding out many unsustainable practices, and entire enterprises. This process should, albeit brutally, make the space itself more robust going forwards.
The bull case remains the same: blockchain is revolutionary technology which can transform numerous legacy systems across almost every sector, including many which are unsustainable, destructive or against the public good.
The long-term outlook for the applicability of the technology itself is undeniable once understood, and one reason we are still seeing very consistent uptake into crypto.
Consider recent analysis such as this piece from Cointelegraph, who noted that payment processing of BitCoin by the CoinPaid gateway has increased by €1 billion monthly even during this latest downturn.
A report by BCG, Bitget & Foresight Ventures anticipates huge growth in the proportion that cryptocurrency makes up within individual investment portfolios, standing now at only 0.3% versus 25% in equities and stocks, predicting major onboarding especially in Latin America and the Asia Pacific regions.
In the Meantime
How long is the piece of string which measures the meantime? Anybody’s guess. Trying to guess bottoms is a dangerous pastime.
We can speculate that this crypto winter, macro conditions permitting, may be shorter than previous cycles – we simply have so much more activity, development and investment now in web3.
What we can attend to is what is best to do during such a time.
Never investing more than you can afford to lose is a vital starting policy in crypto.
Beyond that, the best available move should be investing and holding in projects which you believe have the capacity, community and vision to transform something significant in this world.
That is exactly what Sheesha Finance plans to continue doing.