A month after FTX declared bankruptcy, crypto investors are wondering how much longer will the market lull last!
Repeated breaches of user confidence also affected the sector in 2022. Market participants' confidence must be restored if declining spot prices are to be stabilized and the severe losses of this year are to be recovered.
Vetle Lunde, a senior analyst with Arcana, provided (1) his predictions for the market in a December update.
Lunde believes that the reputational harm caused by FTX will make any prospective comeback a lengthy process.
Many indicators point to a market bottom occurring in the first quarter of 2023. Since the start of the bear market earlier this year, digital assets have fallen by 75%, and another 5% to 10% drop is expected soon.
Lunde suggests investors take it easy for the time being as trading volumes have slowed owing to "unresolved contagion."
Lunde said that the recent price drop for bitcoin (BTC) argues in favor continuing and speeding up a dollar-cost averaging method.
Macro-Level Economic Activities Impacting BTC?
It appears that Bitcoin and US equities are no longer moving in tandem. Low correlations have typically been seen in bear markets.
However, additional macro-level occurrences may provide a more comprehensive picture than the one provided by that connection. Another inflation reading and the year's last press conference from the Federal Open Markets Committee are both scheduled for the week of December 12.
Lunde had previously cautioned investors to avoid holding yield instruments on consolidated platforms because "the yields do not outweigh the dangers of additional contagion and probable insolvency."
A centralized platform is built and managed by a single entity, which handles all financial dealings and sets all associated fees and regulations. A decentralized exchange eliminates the need for a third party to facilitate trading goods and services.
"Overall, [Bitcoin] and crypto remain eerily stable after absorbing the FTX shock, and possible contagion-related knock-on effects loom." In sum, Lunde argued, there are many reasons to tread carefully in the market, and yields of 2% to 10% on your hard-earned money are not worth the dangers.
He compared (2) the stunning impact of today with the Mt. Gox collapse in 2014, followed by the introduction and expansion of "more safe and resilient spot markets." Lunde anticipates that improved exchanges, money, and lending platforms will follow the challenging forecast for 2022.
Institutions Planning to Entry in Cryptos?
Naturally, the industry will feel the effects of FTX's demise, although they may not be as bad as feared. The reason for this is that established organizations are actively seeking out new ventures.
Goldman Sachs, for one, plans to invest millions in low-priced cryptocurrency deals, particularly in crypto firms whose prices have dropped dramatically since the beginning of the year.
Eventually, this will lead to a more developed business and, Lunde hopes, less "short-term gain and long-term misery scenarios" like the perpetual crypto credit crisis of 2022.
Despite this, he doesn't anticipate institutional investors to be among the first to purchase bitcoin or other digital assets.