Macro: Sandcastle economics
Invest wisely in Q3 2024: Discover SaxoStrats' insights on navigating a stable yet fragile global economy.
Senior Quantitative Analyst, Saxo Bank
Summary: The cryptocurrency market in 2022 has been dominated by macropolitical events and inflation worries, as well as questionable crypto applications; cryptos have been in a heavy downtrend through a large part of the second quarter. The narrative around cryptocurrencies has changed, and many parts of the crypto community are under pressure.
Summarizing the points above, the crypto stakeholders from users to developers and miners are divided in their outlook for cryptocurrencies over the next couple of months. When it comes to current and potential use cases, the cryptocurrency space is screaming for a proper regulatory framework for doing business and protecting investors.
The sharp decline in the market cap of cryptocurrencies since the November 2021 peak has definitely shaken the crypto community, and the clean-up of the industry may just have started, making it tough for those with unreliable business models, as well as removing speculators and fake project funders who can no longer get quick funding. A major clean-up is however still expected when the US and EU announce a regulatory framework around digital assets, as this will strongly influence the role that cryptocurrencies may have in the future. Furthermore, the crash of the TerraUSD stablecoin and rising concerns around decentralised finance services may cause the regulation to turn out to be stricter than originally expected.
Cryptocurrencies are currently in limbo, awaiting changes in the general macroeconomic sentiment, regulation and institutional adoption, not to mention the ongoing research into central bank digital currencies as a potential competitor. Pessimists see 2022 as the beginning of a crypto winter, where lower crypto prices and reduced engagement in crypto applications will decrease hand in hand in a negative feedback loop. On the other hand, optimists hope for a positive spiral if the investment appetite in cryptos increases, driving up the price and eagerness to engage in crypto technologies. They see the bear market as an opportunity to prepare for the next bull run and as a healthy clean-up of the crypto space, which can bring back some of the stability and reliability that were lost during the first half of 2022.