Crypto prices have trended higher this year thanks to an encouraging inflation decrease, which could mean the Federal Reserve’s interest rates hikes might stop sooner than expected. With a lingering recession and the recent US banking crisis, many investors have gone back to the crypto world.
Bitcoin prices (BTC) rose above $30,000 in April and, despite a slight pullback, the oldest coin is up about 70% year-to-date in 2023.
Ethereum (ETH) prices rallied last month, after the completion of the Shanghai upgrade, a hard fork in the coin’s protocol (the non-upgraded version is no longer compatible with the updated one).
Does this mean the crypto winter, an extended period of trouble and pricing weakness in the cryptocurrency market, is finally over? “We are still in crypto winter, and companies are operating in survival mode, although many see the light out of the tunnel,” explains Francesco Bisardi, growth expert and marketer with BitGo.
The 2022 crypto winter was characterized by a series of speculations but particularly by the implosion of FTX.
“The industry, along with those of us who contributed to the De-Fi (decentralized finance) development here in Silicon Valley in 2019, was disheartened by the significant setback caused by FTX, yet another Ce-Fi (centralized finance) project,” explains Bisardi, who has been an advisor for Vite Labs (Blockchain), Nonfiction Design, and TechCrunch.
What has alleviated the current crypto winter? At least two things: 1. Keeping the assets on-chain and/or using proof of reserve; 2. Market structure and proper regulations.
“If the first point is straightforward, the second might not be, and it is essential to comprehend the market structure as it affects the level of risk reduction in a market,” says the Italian-born blockchain expert Bisardi. “Because of their more complicated and diverse architecture, established trading markets (normal financial markets) are generally thought to reduce risk better than the crypto markets. In contrast, crypto markets are frequently vertically operated, with exchanges (centralized entities) serving several functions, creating a single point of failure (FTX).”
Bisardi believes that understanding and enhancing the current market structure and creating a separation of duties to prevent fraud is critical for constructing a stable and safe crypto ecosystem.
When can we foresee the end of this crypto winter? “It’s not an easy question,” the Italian crypto expert explains. “This is just my hunch, but it seems likely that we will need to wait until the end of 2023 or 2024 before we can confidently say that the crypto winter has come to an end and the next bull run has begun.”
Bisardi points out this is his own opinion and it’s not intended as financial advice.
The cryptocurrency market is relatively new, and currently, we are experiencing unique macro-geopolitical circumstances. Historically, the crypto market has been cyclical; after a bull run, usually, we see a drop of 70-80% in terms of price and a stagnant market that can last for years. “I believe BTC is the sole coin that truly embodies the concept of being a store of value. It is important to keep a close eye on the BTC dominance ratio as it can be a reliable indicator of market trends,” Bisardi explains.
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