Is This the Cruelest of Crypto Winters?
It’s been an incredibly difficult week for crypto, as total market value plunged below $1 trillion (Reuters.com) with multiple big names in the space making headlines for all the wrong reasons.
Ethereum, the foundation of the hoped-for “DeFi” future, has been one of the worst-performing assets in the entire market, the very existence of crypto lender Celsius is in doubt after it froze withdrawals, and businesses like Coinbase and BlockFi have announced major layoffs.
Have we entered the cruelest of crypto winters? If so, what happens now?
On this week’s episode of Real Vision’s live webcast Crypto Unwrapped, Moritz Seibert, Real Vision’s Co-Head of Innovation Strategy and CIO of Exponential Age Asset Management, begins to answer that question.
One key development would be a merger or takeover involving Celsius.
“Actually, I think it would be a positive for the market,” Seibert explains. “Markets can get stronger in the long run if the non-resilient players are being flushed out.
“But for these players to improve and run a better business going forward, they need to be more transparent about the risks that they run.”
As Seibert notes, Celsius is a huge holder of “staked” Ether, and its questionable future is weighing on Ethereum right now. But there is a bigger picture to consider.
“Celcius is part of the story, but it’s not the only component,” says Seibert. “Overall, investor portfolios are largely on fire. And that is not just because of crypto. Stocks are down, bonds are down. The dollar is up, which is hurtful to most.
“People are hurting, and that’s obviously driving correlations up.”
Seibert also shares his thoughts on Tether’s business model, suggesting changes he’d like to see.
“I’d like for Tether to move more towards a ‘circle’ type of business model, where they’re fully backed by cash in their collateral pool. The way they’re set up now actually opens an attack vector.”
Leslie Lamb, the chief marketing officer at CoinFLEX and the host of Crypto Unstacked Podcast, describes what “crypto winter” could mean this time around.
“There’s still a lot ahead for the crypto industry. But, in terms of operations of crypto companies, it’s the survival of the fittest when it comes to crypto winter,” Lamb says. “Cash is king with all of the companies out there in the space securing funding, which is not a lot at this point.
“But those will be the operations that continue onwards during this crypto winter.”
Despite the recent turmoil, enthusiasm at Consensus 2022 about the underlying technology and the future was high. But participants are dealing with reality too.
Sidney Powell, co-founder and CEO of Maple, shared with Real Vision’s Elaine Ly tips on how to prepare for the next six months that echo Lamb’s observations.
“Anyone who is building should focus on stacking their treasuries so they can ride out what could be a prolonged one to two-year bear market,” says Powell.
“I’d say ‘smart capital’ is going to be allocating some amount to buy the dip but then remembering that fixed income pays a yield, so they get capital preservation and are still earning income and yield on their capital stack.”
Crypto Unwrapped streams every Wednesday at 10 a.m. ET as part of Real Vision’s expanding commitment to democratizing finance by fostering a deeper understanding of what’s happening in crypto, NFTs, and Web3.