Is Bitcoin and the Rest of the Crypto Beyond Its Worst Now?

The price of bitcoin and other cryptocurrencies have fallen more than 60% this year as a result of the collapse of FTX. Moreover, the destruction has now reached publicly traded firms that have exposure to digital assets.

The price of bitcoin and other cryptocurrencies have fallen more than 60% this year as a result of the collapse of FTX. Moreover, the destruction has now reached publicly traded firms that have exposure to digital assets.

In the past month, shares of Coinbase, Square owner Block (SQ), leading bitcoin miners Riot (RIOT) and Hive (HVBTF), cryptocurrency bank Silvergate (SI), and software company MicroStrategy (MSTR), managed by Michael Saylor, have all experienced steep declines.

Is the worst, though, almost over? After all, in this still-developing market, volatility has been a constant. Cryptocurrency is known for sharp drops and breathtakingly dramatic recoveries.

As long-time supporters of bitcoin will attest, this is hardly the first cryptocurrency winter. Massive adjustments were made in 2018, the beginning of 2020, and the summer of 2021 as well.

Could equities and cryptocurrency prices thus see a recovery in 2023? Crypto bulls believe as such... However, they think that investors should have more realistic expectations.

Hany Rashwan, CEO of cryptocurrency investing company, declared that "it is extremely evident that we, as an industry, need to produce better solutions." "The last bull market contained a lot of fluff. Exuberance was being sought after.

Rashwan said that he is rather shocked that the cryptocurrency carnage hasn't been substantially worse.

Even after the current sell-off, which saw bitcoin's price fall more than 15% in just November, it is still trading at approximately $17,000. That is around three times where prices were in the early dark days of 2020, during the height of the crypto bear market.

"How on earth are we still so close to $17,000? That is significant. The fact that people are still using cryptos and attempting to protect their investments is telling. Rashwan stated that trust had not been completely shaken.

Others make the point that the blockchain technology that underpins bitcoin and other cryptocurrencies is still strong.

For the foreseeable future, there will be some obstacles. But ultimately, we do anticipate improvements. This will act as a trigger. Institutional use will increase, predicted John Avery, FIS's strategy and product leader for crypto, Web3, and capital markets.

Avery stated that in 2023, he also anticipates greater regulatory clarity for cryptocurrencies. That will ultimately be advantageous.

Innovation and investor protection must always be balanced, he said. "Regulation doesn't always provide a solution for everything. But it is significant.

Others have noted that FTX's swift fall ought to benefit the businesses that make it through this crypto catastrophe. Even if the price is currently declining, Coinbase in particular may end up profiting in the long run.

According to Fadi Massih, vice president of Moody's Investors Service's financial institutions group, "FTX's quick failure will prompt additional regulatory control and examination of the sector, which we anticipate will ultimately translate into clearer norms for participants in the crypto market." Given its size and more established position in the industry, Coinbase would probably gain from this.

But the difficulties in the crypto space should ideally demonstrate to investors for all time that bitcoin is not (and never will be) a replacement for the US dollar or other currencies backed by governments. Still a speculative asset, cryptocurrencies. That itself is not a problem. Investors simply need to be aware of the hazards.

According to a report by Jason Pride, chief investment officer of private wealth, and Michael Reynolds, vice president of investment strategy at Glenmede, "Cryptocurrencies have been lauded by some for their decentralized nature, ease of transaction, and low transaction costs, but even bitcoin, the oldest cryptocurrency, continues to be more volatile than stocks and bonds, precluding it from being a viable store of value."

Pride and Reynolds also said it's mistaken to believe bitcoin can hold up well during turbulence in the stock market. As opposed to that, this year has shown that cryptocurrency is not a viable hedge, particularly when tech stocks decline. Due to this, "its use as a portfolio diversifier is considerably limited."

The Earnings Parade Goes Oon

The general stock market has actually experienced a surprising rebound at the same time that there is pandemonium on the crypto front. The possibility of more gradual interest rate increases from the Federal Reserve has been welcomed by investors. As consumers and corporations continue to spend, they have also been expressing anticipation that corporate profits will surpass expectations.

In the upcoming week, a number of well-known businesses from a number of important industries will report their profits, including AutoZone (AZO), Toll Brothers (TOL), Campbell Soup (CPB), Brown-Forman (BFB), GameStop (GME), Chewy (CHWY), Broadcom (AVGO), Costco (COST), and Lululemon (LULU).

However, one market strategist is concerned that the fourth-quarter and 2023 results would let Wall Street down. The Fed's rate increases may eventually have an impact on demand.

According to Kevin Barry, chief investment officer at Summit Financial, "the earnings shoe is starting to drop."

In particular, social media and IT are proving to be cyclical markets that were previously believed to be impervious to economic constraints, according to Barry. For instance, Meta Platforms, the company that owns Facebook, has had a disastrous stock year. Additionally, market leader in cloud software Salesforce (CRM) just released disappointing guidance.

READ: According to Cryptocurrency Billionaire Mike Novogratz, FTX's Sam Bankman-Fried will Serve Time in Prison

Post a Comment

Post a Comment