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Even amid the crash, there&039s some optimism about the future of crypto – Marketplace

Uncertainty is affecting the cryptocurrency market and cryptocurrency companies in the industry are changing. Digital currencies like bitcoin returned to the market last week, but fears of a “crypto winter” persist. bitcoin, the world’s most popular cryptocurrency, has lost more than half its value this year.

In general, since the end of 2021, the market values ​​of digital assets, such as cryptocurrencies and non-fungible tokens, have plummeted. Some big lenders like Celsius Network and Three Arrows Capital have filed for bankruptcy amid claims of poor risk management, while some of the bigger players like Coinbase are laying off staff.

Reading: Future of bitcoin 2021

Despite market turmoil and falling stocks, some are optimistic about the future of cryptocurrencies. William Cai, co-founder and managing partner of financial services firm Wilshire Phoenix, which was founded in 2018, said the latest crash doesn’t necessarily point to the downfall of cryptocurrencies.

“The biggest insight we have is that this time is different than previous so-called crypto winters,” Cai told “Morning Market Report” host David Brancaccio. “I think one thing that crypto investors and all investors should keep in mind is that the crypto market has been getting a lot of signals from the broader markets, economic conditions, and stocks.”

The following is an edited transcript of their conversation.

david brancaccio: things go up, things go down. but what happened, what is happening, with cryptocurrencies in the last eight months, would you say the foundations cracked?

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william cai: no, definitely not. it’s been interesting. the most important idea we have is that this time is different from previous so-called crypto winters. I think one thing that crypto investors and all investors should keep in mind is that the crypto market has been getting a lot of signals from the general markets, economic conditions, and stocks.

brancaccio: thus the economy in general. look, the concern about inflation, the central bank raising interest rates, the money coming out of the stock market, do you think crypto is partly caught up in those currents?

cai: yes, absolutely. if you look at the last six months, or even less, the price correlation between the crypto markets and the s&p 500, [or even] better the nasdaq, has been very high. I think if you anonymize the data, take out the ticker or bitcoin or any of the tech stocks, if you just combine the time series, it would be hard to know if, if you can choose whether it’s bitcoin or versus some of the tech stocks. So what’s interesting about this is that even if we’re in the crypto winter, we’re not going to make it out of the crypto winter, unless the general economic activities pick up or the stock market starts to pick up. it’s really taking signals from the general market, rather than, and we’ve had some pretty big events, bankruptcies and events within the crypto space, but not really, as you were saying, [been] shaping the foundation. has been showing a lot of resilience. and I think he is waiting for the market in general to improve.

brancaccio: ah, the power of the metaphor, you refer to it as the “crypto winter”, implying that there will be a “crypto spring”, so I see your point that such may not be cryptographic. Armageddon, that’s not what I’m hearing.

cai: absolutely not. absolutely not. I think similar to previous so-called crypto winters, the underlying foundation, development, technology, and adoption [of cryptocurrencies] have continued. and yes i think we here at wilshire are very optimistic about the future of cryptocurrencies.

brancaccio: but it must be disturbing. when you see companies like celsius that lender in crypto is now in bankruptcy protection or a stablecoin is shown not to be stable

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cai: absolutely. [for] each one of those events, our opinion is, “is this significant? yes. but at the same time, they’re not.” and let me explain what we, what we think. is new technology. and new technologies sometimes they fail but better and newer technologies will come and replace them actually i want to mention because you mentioned celsius we think this is not so much what’s wrong with the crypto space per se this is a bit of a repeat of all i would say new asset classes and speculation this comes from you know greed and a little bit of lack of risk management so this is kind of a shake up of those who are too leveraged that’s too much and I think this is a good thing overall for the crypto space for us to get on a better footing.

brancaccio: Certainly some of this was a fad, wasn’t it? however, bitcoin, last november at $65,000 each, is now down, you know, when we’re talking low $20,000. you know, is it like a tulip in the eighteenth century? I mean, tulips are still useful, you can put them in your garden, but they’re not a big investment, or it’s a different hobby, do you think?

cai: A couple of thoughts come to mind. so bitcoin itself, i would be concerned if the entire crypto space was just bitcoin, right? but bitcoin has, one, it’s proven its resilience and technology but it also built the foundation of blockchain technology and that’s really expanded so you’ve got these ecosystem blockchains like ethereum or solana and people building decentralized financial applications and products over. and that’s where we really think the exciting growth of the cryptocurrency field is going to go. As for your kind of example of asset crashes or bubbles, I think maybe an interesting example that could be comparable to tulips is nfts.

brancaccio: yes, non-fungible tokens, a way to verify the authenticity of what you know, for example, a piece of art that you can essentially use on this digital device.

cai: I think the nft has certainly gone crazy in the last couple of months and now along with the other assets, in terms of pricing, it’s definitely gone down in terms of pricing. and interest but yeah, at the same time i think even in the nft, the non-fungible tokens, their representation of art, are not entirely useless to me. brings pleasure to people. and it’s like art, it’s art, and for me there is value in such instruments, especially in terms of decentralized ownership and fractional ownership blockchain. it is good that the bubble is also consolidating and deflating. but i think nfts, like other assets, is here to stay.

brancaccio: You know, you’ve told me that cryptocurrencies could still play a role in a portfolio in the hands of a sophisticated investor, an institutional investor. but you know, this must happen to you, it happens to me, I mean, nieces and nephews are saying, you know, should I put everything in crypto? and you know, it’s one thing if a person worth $100 million puts 2% into crypto, knock you out, but when a newbie puts up five or 10 thousand, and that’s half of everything he owns. I mean, that’s a different story.

cai: no, you’re absolutely right. there’s risk in crypto investing but i think you alluded to it it’s about understanding the risk and more importantly the size how does crypto or any risky investment work how does it fit into your portfolio what do you know Are you comfortable with risk? It definitely shouldn’t be, I think for 99% of investors, it shouldn’t be 50% or more of their overall investment portfolio. and I think what should help and I think one thing as we work with regulators is a strong and protective regulatory framework that encompasses crypto assets that will help educate investors and offer a level of protection in terms of, for example, like investor education and what they are really putting into their investment portfolio.

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