The crypto winter threatens to get into the ice age

After a spectacular crash at the beginning of this year, the most popular tokens in the crypto industry fell asleep, which indicates that amateur investors have no longer loved the once exciting asset class and decided to keep big funds.

The price of the largest token, Bitcoin, has largely been around $ 20,000 since August, after reaching its maximum of $ 70,000 a year ago. Ether, the second largest, has not recovered since his environmental overhaul in September. According to the analysis platform cryptocompare, the average annualized volatility for Bitcoin has now been the lowest since October 2020.

First, the decline in token prices was referred to as the "crypto winter"-one of the regular break-ins of the market. But the length of these now dreary phase, combined with the thousands of job losses in the industry in recent months, indicates that it is more of an ice age in which no major theories appear as the next fuel source for rally.

"The narrative silence is deafening," said Edmond Goh, commercial manager at the crypto broker B2C2. "At some point a narrative will appear that does the Tut [Break the Impasse] - perhaps inflation or a large regulatory announcement. Maybe something completely unexpected."

The digital asset investment and trading group Coinshares describes this as a "apathetic time".

In some cases, Krypto has suffered the same malaise as other highly speculative asset classes since it became clear almost a year ago that US interest rates had to rise quickly to combat the continued inflation.

The technology-based Nasdaq stock index in the USA fell by 30 percent last year-one of the worst performances in the industrialized countries. But the decline of Bitcoin by almost 70 percent in the same period is steeper, and the collapse of token Luna and the associated so -called StableCoin Terrausd in May lost about $ 40 billion for investors and shook trust in crypto even deeper. The market capitalization of the industry has shrunk from $ 3.2 trillion to less than $ 1 trillion.

thousands lost their jobs after stock exchanges such as Coinbase and Gemini dismantled large parts of their workforce, while the crypto hedge fund Three Arrows Capital and the Celsius Network Bankrott loan platform went. Even top -class managers in the industry have given up their posts, including the former industry bosses Jesse Powell von Kraken, Michael Saylor by Microstrategy and Alex Mashinsky by Celsius.

The flat price has deterred speculators and left the market long -term bulls. In the industry known as "Hodl-Oers"-short for "Holding on for Dear Life"-they seem to do exactly that. Morgan Stanley estimated this week that 78 percent of all Bitcoin units have been used for no transaction in the past six months.

Apart from the harder interest environment, some of the main arguments for crypto have proven to be incorrect. El Salvador's experiment with Bitcoin as an official currency has fallen flat, while crypto failed as a protection against inflation - prices have fallen, even when inflation in industrialized countries has reached 10 percent.

"[Bitcoin] has not acted as an inflation protection or as a value preservationist in recent years," said Alkesh Shah, strategist for digital assets at the Bank of America.

Even a successful change in energy-intensive crypto mining practices to a low-carbon alternative has not contributed to lifting the mood. In September, the Ethereum network carried out the so-called merge and hopped to a greener blockchain. The step has reduced the energy consumption of the network by around 99 percent, but there must still be an increase in the value of ether, the token bound to the blockchain.

The pain for others may not be over yet. Crypto-miner who generally use computers to solve puzzles against tokens also feel the pressure. While you have to spend constantly increasing sums for energy, you will be rewarded.

The mining company Core Scientific noted in the USA warned this week that it could no longer have money by the end of the year and has to register bankruptcy, which made its shares fall by more than 70 percent. In an application for admission, the company blamed the low price of Bitcoin, increased electricity costs and legal disputes with the now bankrupt credit platform Celsius.

Despite falling values, some remain optimistic. Dan Ives, Managing Director of Wedbush Securities, said: "This was a brutal time for risk systems, including crypto.. But the investment class has come to stay." However, he also said that "blockchain and other applications are the key to the future of crypto".

In August, Coinbase announced a deal with black skirt to give the customer of the asset manager access to digital assets, a step that is considered a potential turning point for the mainstream hopes of crypto. The giant asset management said that despite the market decline, he saw “still considerable interest” at institutional customers.

Nasdaq, Mastercard and Bny Mellon have also announced cryptodic services in the past few weeks, which underpins the argument that the institutional interest in digital assets remains despite this year's crash. But it can take some time for interest to turn into something firmer.

"There are no basics on which crypto is based, or if they exist, they have not yet been identified," said Charley Cooper, Managing Director of Blockchain company R3. "I think the idea that we will suddenly experience a spectacular bull run before the broader economy gains a focal."