2022 is over, and the Bitcoinist staff decided to launch this Crypto Holiday Special to give you some perspective on the crypto industry. We will talk to many guests to understand the highest level of this year for crypto.
In the spirit of Charles Dicken’s classic, “A Christmas Carol,” we will examine crypto from different angles, look at possible trajectories for 2023 and find common ground among various views of the industry that can support the future of finance.
During the last week, we spoke with institutions about their perception of 2022 and the outlook for the coming months. We will start our expert round with Material Indicatora market data, and analytics company dedicated to building trading tools for a new sector.
Material Indicator: “While we have not seen tradfi prices (Traditional Finance) in earnings contraction (~Q1’23) for the last leg down, we are close to sensible sentiment.”
Material Indicators and its team of analysts measure market sentiment and liquidity and try to read between the lines of what the big players are doing to give a clear, uncluttered view of the situation and possible direction. Here’s what they told us:
Q: What is the most significant difference for the crypto market today compared to Christmas 2021? Beyond the price of Bitcoin, Ethereum, and more, what has changed from a moment of euphoria to a constant fear today? Is there a decline in adoption and liquidity? Is the foundation still valid?
A: The difference is striking! Since the explosion of FTX, the influx of newcomers to Crypto Twitter has decreased. Salty Youtubers will now advise you to sell your remaining coins to avoid total loss. The Telegram community has shrunk. Big accounts that have been telling their followers to buy have stopped or rebranded. While we have not seen tradfi prices (Traditional Finance) in earnings contraction (~Q1’23) for the last leg down, we are close sentiment-wise.
Q: What is the dominant narrative driving the change in market conditions? And what should be the narrative today? What do most people face? We saw major crypto exchanges exploding, hedge funds deemed impossible, and ecosystems promising financial utopias. Is Crypto still the future of finance, or should the community pursue a new vision?
A: On the contrary. Circumstances create narratives. Loose monetary policy and abundant cheap credit created bubbles and nurtured fraud. Only after the low tide did we see who had been swimming naked. With rising unemployment, people will try to hide bonds, which actually increases the availability of credit for risk assets. So, while income-driven assets will feel the pain of higher unemployment, credit-driven assets (risk assets) will feel relatively less pain.
Q: If you had to pick one, what do you think is the key moment for crypto in 2022? And will the industry feel the consequences in 2023? Where do you see the Christmas industry going next? Will it survive this winter? The mainstream has once again announced the death of the industry. Will they finally get it right?
A: Terra/Luna may be the catalyst for all the next explosions and we have yet to see the full effect of the contagion (DCG/Grayscale/Genesis is not yet fully finished). As with anything, this will only invite more regulations that will not protect investors, or increase the potential for growth. We wanted the adoption institution and now we see that they have zero risk-management and gambled away user funds.
Q: Finally, on social media, you at Material Indicators publicize your bearish bias. Are you more pessimistic than at the beginning of 2022? And what would you like to see to shift the bias and tilt to the long side of the market? We know a lot depends on the Federal Reserve, is the possibility of a pivot and lower interest rates rising higher?
A: While we may not be out of the woods yet, we can almost see the light. In poor earnings & poor forecasts bonds will likely hold bids in Q1’23, and therefore make credit available for risk assets to dampen the fall or even help people recover (especially if the Treasury manages to relieve the RRP of ~$2T idle. liquidity). Bitcoin can also benefit from this as it is only subject to credit availability and not income. However, while inflation has and will continue to decline for some time, it is unlikely that we have seen the last of it. So, watch for inflation to pick up again in late-’23/early-’24.