Finance

Are cryptocurrencies dead? Where is the truth

There are those who predict Bitcoin at 100 thousand dollars and those who fear for the fate of cryptocurrencies. These graphs offer clarity on the current situation and point to a possible path forward.

In the world of cryptocurrencies , where bull market enthusiasm can quickly be overwhelmed by a bear market, you often find yourself asking: Are cryptocurrencies dead? However, the data and indicators tell us a different story. While the current market may appear to be contracting, with the price of Bitcoin down 12% in recent months and the sector’s total market capitalization down 64% from its November 2021 peak, there are many reasons to remain optimistic about to the future of cryptocurrencies.

Premise, Bitcoin has died 466 times

Over the past decade, Bitcoin has died 466 times according to the website 99Bitcoins.com, but reality tells a very different story. As Alessandro Frizzoni , CTO and co-CEO of Cryptosmart, points out, volatility is an intrinsic characteristic of Bitcoin: in 2017-2018 it went from 1,000 to 16,000 dollars, recording an increase of 1600% in one year. In 2019, however, it collapsed to $3,500, a fifth of the previous high. In just two years, it rose again to over $60,000, reaching an all-time record in November 2021.

“ The return of an asset is related to risk and Bitcoin has had an average annual return of 70% since its inception, an exceptional result compared to other forms of investment ,” said Frizzoni.

Looking ahead, a similar relationship between risk and potential return is expected. In addition to volatility, Frizzoni points out that Bitcoin’s future performance is influenced by factors such as technology adoption and monetary policy . The increase in the monetary base helps to support its value, therefore in view of a decrease in interest rates, a new interest in cryptocurrencies can be expected.

The launch of Bitcoin Spot ETF

In the short term , Frizzoni believes there may be other determining factors supporting the price of Bitcoin . The introduction of crypto exchange-traded funds (ETFs) could generate a significant inflow of capital into Bitcoin and Ether, revolutionizing investments in digital assets. AB Bernstein, one of the giants of global asset management, has formulated interesting predictions for the world of cryptocurrencies, estimating the entry of around 100 billion dollars into Bitcoin through this route. According to the company, Bitcoin ETF regulatory approval could come by mid-March 2024 .

This news could have an epochal impact on the crypto ecosystem, facilitating access to the market for traditional investors without the need to directly manage digital assets.

If this prediction comes to fruition, this could catalyze growing interest and institutional investment in Bitcoin, helping to solidify its adoption and growth across the global financial landscape. However, it remains to be seen how the dynamics will evolve in the meantime and whether this prospect will actually materialize.

Several institutions, including BlackRock , Fidelity , Franklin Templeton and Invesco , are looking to launch Bitcoin-related ETFs . Currently, applications have been submitted for 8 Bitcoin ETFs, 3 Ethereum ETFs, and 15 Ethereum futures ETFs. Grayscale ‘s recent legal victory against the US Securities and Exchange Commission (SEC) is not just a win for a single fund, but opens up new perspectives for the entire market. These developments indicate growing institutional interest and positive outlook for the cryptocurrency sector.

It is possible to buy Bitcoin on Cryptosmart , the first entirely Italian platform for buying, selling and depositing digital assets such as cryptocurrencies. The pillars underlying the services offered are those of transparency, ease of use and security.
The exchange is aimed at professional operators and all those who want to approach the world of cryptocurrencies for the first time, making the management of operations simple and linear also thanks to its headquarters in Italy.
With Cryptosmart it is possible to carry out low-cost operations, independently and with the possibility of receiving personalized assistance.

Staking at all-time highs

Another surprisingly positive signal comes from liquid staking , which has reached all-time highs despite the cryptocurrency bear market. It is an unmistakable signal that – even in moments of uncertainty – internal dynamics exist that can lead to surprising results. As one industry researcher noted, Infrastructure upgrades can act as major catalysts that drive more capital into space .

Staking

The following graph shows the total daily wallets on Ethereum and in the layer-2 landscape. Users in the Ethereum ecosystem are at an all-time high despite being in a bear market for two years, notes DeFi researcher Thor Hartvigsen, aware that some of this activity comes from robot airdrop farming.

Ethereum users

The outflow of capital from stablecoins has stopped

In 2022, the total market capitalization of stablecoins has seen a steady decline, highlighting outflows from the sector. However, for the first time in a year and a half, that trend appears to have found a pause starting in early August, as illustrated below. At the moment, stablecoins represent one of the main areas of use of cryptocurrencies and significant development of the sector is expected in a growing market.

Stablecoin market cap

In conclusion, despite the climate of uncertainty that can surround the world of cryptocurrencies, there are clear signs of vitality and positive prospects. So while sentiment may be at an all-time low, solid foundations are being built for a promising future for cryptocurrencies. It remains to be seen how these developments will play out in the near future, but optimism is certainly justified.

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