Despite several black-swan events, the crypto sector continues to receive support from global institutions. Going forward, it may just take time for the asset class to mature.
The current crypto market is still experiencing shockwaves triggered by last year’s black-swan events. Black-swan events are rare, unpredictable, and serious events that can have a significant impact on financial markets, including cryptocurrencies.
Examples of previous black-swan events that affected the cryptocurrency market include the 2017 China bitcoin ban, the 2014 Mt. Gox hack, and the 2020 COVID-19 pandemic. Last year, several crypto institutions collapsed. This year, the collapse of Silvergate Bank raised doubts in the crypto market.
While it is impossible to predict when and how black-swan events will occur, institutions and individuals can prepare for them by diversifying their investments. They do this by using risk management strategies and staying informed about the latest developments in the market.
critical market conditions
Bitcoin, the largest cryptocurrency by market capitalization, has seen a sharp decline in its price. It was mainly triggered by the crash of global markets in response to the above events. However, it made a sharp comeback towards the end of the year. This was partly driven by the influx of institutional investors and the growing acceptance of cryptocurrencies as a legitimate asset class.
There has also been tremendous growth in the decentralized finance (DeFi) space. The total value locked in these platforms grew from less than $1 billion in June 2020 to more than $47 billion at the time of press. However, this growth also came with significant risks, as several high-profile hacks and exploits exposed the vulnerabilities of these platforms. Institutional investment in cryptocurrencies and the DeFi space has seen good funds circulate the network.
S&P Global Market Intelligence published a report to show the investments here:
The crypto market remains highly volatile and subject to black-swan events that can cause significant price fluctuations. While one should still expect some level of volatility in the short term, crypto institutions are optimistic about market recovery.
take an optimistic view
Salma Belghali, Global Head of Business Development and Partnerships at BitMEX, is speaking on the matter. In an exclusive interview with BeInCrypto, Belghali had interesting points to cover.
For example, when asked about the ongoing struggling market trend, he said:
“One of the positive signs we have seen is that the interest from global institutions has not waned amid the volatility in the market. The same goes for the growth potential as seen in markets in Asia as they adopt a more crypto-friendly stance. Simply looking at the trading activity on the BitMEX platform, we can see that trust is on the rise. With several blockchain projects emerging once again, as well as the upcoming Ethereum Shanghai upgrade, we expect a bull market to be just around the corner.
Despite recent market volatility in the crypto space, global institutions have shown continued interest in cryptocurrencies. This can be seen in the growing number of institutions, including banks, hedge funds, and asset managers, that have started investing in or offering cryptocurrency-related services to their clients.
For example, major investment banks such as Goldman Sachs, JP Morgan and Morgan Stanley have begun offering their clients cryptocurrency exposure through various investment products such as bitcoin futures contracts and exchange-traded funds (ETFs).
Furthermore, major asset managers including BlackRock and Fidelity have also launched cryptocurrency investment products or are actively exploring the space.
push through the storm
In addition, central banks of many countries are also exploring the possibility of launching their own digital currencies. This indicates a growing interest and acceptance of cryptocurrencies at the institutional level.
Furthermore, companies such as BitMEX continue to take steps for further growth in the midst of a downturn in the market. For example, the crypto exchange, which says it has no FTX or Alameda exposure, even launched a native crypto token (BMEX) for traders. Despite market volatility amid the demise of the FTX exchange run by Sam Bankman-Fried.
Needless to say, the coin saw a roller-coaster start. In the past 12 months, BMEX lost approximately 78% of its value. But it started rising in 2023 and has increased by 16% in the first 45 days of the year. Currently, the 418th ranked coin is trading around the $0.53 mark.
Despite the severe price correction, the team envisions a bright future for the respective coins. This is evident in the strategies put in place by the team despite their weak start to 2023.
Bullish about crypto in the long run
The executive is also optimistic about the underlying blockchain technology, which has immense potential to aid the crypto sector. In fact, she stressed, the properties of blockchain technology could increase efficiency in some traditional industries, particularly with regard to accessibility and transparency.
Speaking further to BeInCrypto, Belghali said:
“For example, we have seen increased adoption in sectors such as shipping, healthcare, retail and even education. Its potential is limitless as technology leaders continue to develop and create new products that change the way we think, will help revolutionize the way we work and do business. We anticipate that there will be more use cases of blockchain in the future.”
Like retail, institutional adoption will play a key role in the coming years. Eric Peters, CEO of One River Digital Asset Management, believes the next crypto bull run will be compelling because it will be driven by institutional adoption. Despite the prevailing downtrend, the executive believes the bull run may have already begun.
Nonetheless, the crypto sector will see such a decline and eventual rise. As in the famous quote from Samuel Beckett: “Ever tried. Never failed. Never mind. Try again. Fail again. Fail better.”
give crypto some time
While cryptocurrencies like bitcoin and ethereum have been around for over a decade, the industry is still relatively new and constantly evolving.
One of the reasons crypto needs time to grow and mature is that it still needs widespread adoption by mainstream institutions and individuals. While some large companies have started accepting bitcoin as payment, most businesses and individuals still need to start using cryptocurrencies for daily transactions. The lack of adoption can lead to volatility and uncertainty in the market, as the value of cryptocurrencies can fluctuate depending on a few big players.
Additionally, the regulatory environment for cryptocurrencies is still developing. Governments around the world are trying to figure out how to regulate cryptocurrencies while allowing for innovation and growth in the industry. This regulatory uncertainty can create uncertainty for investors and businesses, slowing adoption and change.
Another factor is that the blockchain technology behind cryptocurrencies is still being developed and refined. While blockchain has the potential to revolutionize industries such as finance and supply chain management, it is still a relatively new technology with limitations and challenges that need to be addressed.
While cryptocurrencies have shown promise as an innovative and disruptive technology, they still need time to mature and overcome challenges and barriers that hinder their widespread adoption and integration into mainstream society.
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