Crypto Winter Will Get Colder According to Industry Experts

3 November 2022, 04:45 GMT+0000
Updated by Kyle Baird
3 November 2022, 04:45 GMT+0000
In Brief
  • Tezos co-founder blames venture capital firms for exacerbating the bear market.
  • Increasing interest rates will likely make cash more attractive in the short-term.
  • Crypto market cap is sitting just above $1 trillion.
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The crypto winter and bear market of 2022 is far from over, according to some industry experts. On-chain data backs up the premise that the ice won’t be thawing for a while yet.

According to Tezos blockchain co-founder Kathleen Breitman, the ongoing crypto winter is “only going to get worse.” The industry needs to recalibrate to a higher interest rate world, she noted.

Speaking to CNBC on Nov. 2, the industry expert blamed venture firms for the bear market.

“A lot of this was inflated on cheap money, and a lot of this was backed by basically, like, VCs trying to pump.”

Breitman added that the easy money flowing into the system stoked the value of some of the companies. She used OpenSea as an example. The marketplace’s trading volume slumped 88% between September 2021 and September 2022.

The comments were primarily focused on the over-inflated valuations of crypto companies rather than the actual asset prices.

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Tezos (XTZ) has largely fallen out of favor among crypto traders and investors. The once-hyped proof-of-stake asset has slumped 84.5% from its all-time high and is currently residing at 46th with a market cap of $1.2 billion.

Crypto Winter Comparison

Breitman commented that increasing interest rates would also prolong the crypto winter, likely making cash more attractive.

Also commenting on crypto winter at the Lisbon Web Summit was Binance boss Changpeng ‘CZ’ Zhao. The ever-optimistic crypto billionaire said that crypto was probably the “only stable thing in this very dynamic environment.”

He also commented on the correlation with tech stocks as well as the reaction to Fed rate hikes.

“When the Fed raises interest rates, and the stock market crashes, they want more cash, so they sell crypto. This is because the user base is still very highly correlated,”

On-chain Outlook

Earlier this week, on-chain analytics provider Glassnode made some comparisons with previous crypto winters and bear markets.

It stated that Bitcoin was hammering out a bottom, and there were “textbook resemblances to prior cycle lows.”

Now that financial losses have been inflicted, the final thing remaining is a “component of time and investor apathy,” it added.

The same conditions played out in the 2014-15 bear market and the crypto winter of 2018-19. This cycle has only been building a bottom for four months, so it’s likely to extend well into 2023, especially if interest rates keep rising.

Crypto markets have fallen marginally on the day following the Fed 75-point rate increase on Wednesday. Total capitalization was at $1.05 trillion as a consolidation phase continues.

Disclaimer

BeInCrypto has reached out to company or individual involved in the story to get an official statement about the recent developments, but it has yet to hear back.