The Resurgence of the Cryptocurrency Winter | Eran Fishov

The Resurgence of the Cryptocurrency Winter | Eran Fishov

As the sun sets on a new day, casting its golden hues across the sky, filled with the air of anticipation for a new day to emerge, brimming with possibility and promise for a brighter future.

Although the cold and devastating winter that the cryptocurrency industry has been going through in the last year of 2022, a rustling warm breeze is rising, indicating the awakening of the surrounding nature in anticipation of the new spring season to come. for the crypto industry. The long-awaited resurgence of the cryptocurrency market is set to regain value and assert its position as a major player in the financial world.

Waking up from winter sleep. Source: AI-generated image via Midjourney’s Generative AI Tool

Moreover, the current market situation metaphorically resembles the awakening of the bear, as the winter thaw sets in. The bear slowly emerges from its hibernation, stretching its mighty paws and absorbing the sights and sounds of the waking world. Likewise, it is imperative that industry leaders and regulators come together and take immediate action to revitalize the crypto industry.

Looking back to 2022, the world faced huge economic downturns, which created unfavorable conditions for cryptocurrency businesses to thrive;

Macroeconomic factors

Overall, macroeconomic market conditions in 2022 have been challenging, with crippling high inflation, forcing the Federal Reserve to increase the interest rate paid on reserve balances to 4.4%, marking the highest rate in 15 years which made it super tough. for both individuals and businesses and has raised concerns of a global economic recession.

The sheer decline in stocks of the biggest tech companies in early 2022 set the tone for the S&P 500’s decline, hitting the biggest annual percentage decline since 2008 with a total reduction of $8 billion. And as the entire financial market began to crash, the value of Bitcoin, as well as the entire cryptocurrency market, also fell.

Crypto Market Volatility

High cryptocurrency price volatility is often seen as the crypto industry’s “catch-22” syndrome when it comes to market performance and valuation. On the one hand, it can benefit its investors from favorable surges when the market is bullish. However, “when it rains, it rains”, in a sense where financial markets are unstable and evident in the drastic shifts in market demands, coupled with pessimistic investor sentiment, high volatility turns the entire crypto market upside down. -currency at a full on collapse.

Notorious financial crimes resulting in negative publicity

The year 2022 will be remembered as the year of notorious fraud scandals in the history of the financial world and in the cryptocurrency industry in particular, starting with the collapse of the Luna and TerraUSD cryptocurrencies in May, leading to the downfall of the volatile Singapore-based crypto hedge fund Capital of the Three Arrows (3AC), evaporating a staggering $42 billion in value to investors.

These events served as a harbinger of the coming catastrophe and the first ripple in the pond presaged the coming financial tsunami;

In July, major crypto lending companies, such as Celsius Network And Traveler took a nosedive by filing for Chapter 11 and going bankrupt, wiping out $3 billion and $1.4 billion, respectively.

the despicable FTX the implosion in November marked the high point of the crypto crash. Beyond the disturbing $32 billion valuation that disappeared, the ease with which this scam was well organized and facilitated by crypto prodigy Sam Bankman-Fried and his partners in crime was the perfect storm to unleash the global public propaganda against crypto. market and served as the catalyst for the crash of the entire cryptocurrency industry.

Can the crypto industry be reborn after such a disastrous year?

To put things into perspective, following the crash of crypto exchange FTX, as the media continues to make noise about an apocalyptic crypto crash, it is essential to recognize that the FTX fallout is first and foremost a peculiar fintech fraud. that happened at a poorly run cryptocurrency exchange company.

“Learn from yesterday, live today, hope for tomorrow.”
-Albert Einstein

Looking back, in the aftermath of some of the world’s greatest tragedies such as the sinking of the “unsinkable” RMS Titanicthe incident became a true “single lucid moment” for everyone, which paved the way for the establishment of rigid regulations and policies dictated by countries and relevant national and international agencies, ensuring that this unique incident outrageous is the last to happen.

The RMS Titanic hits an iceberg, illustration.
Source: AI generated image via AI build tool Midjourney

Following the RMS Titanic disaster, new rules and policies were set, such as ensuring sufficient lifeboats on board, maintaining radio monitoring bandwidth for distress signals and the creation of the International Ice Patrol to monitor icebergs in shipping lanes.

In retrospect, these measures made it easier to move beyond the Titanic incident to bring the marine world to prosperity, with 60 global cruise lines across 300 cruise lines serving 30 million ocean cruise passengers each year and generating more $37 million a year in the United States alone..

Similarly, looking at the crash of FTX and the devastating downfall of some of the biggest crypto firms in 2022, regulators must seize the moment and act immediately to enforce the policy implications domestically and internationally and safely escort the 1 trillion dollars. cryptocurrency market to a safe harbor.

These policies must provide safeguards with the correct and sufficient proportion of checks and balances to be met and with strong evidence of reservations and liabilities. These policies will facilitate standardized regulations on centralized crypto exchanges and stablecoinson to ensure the long-term viability, credibility and stability of the cryptocurrency industry as well as its supporting blockchain and web3 backbone infrastructure in a foreseeable future.

2023 – the year of manifestation of crypto regulation

Many leaders across the globe have been advocating for the establishment of a standardized cryptography framework that would pave the way for many more protests to occur in the imminent future.

Such a manifestation is taking shape in the UNITED KINGDOMas the issue of regulation was raised by Minister Andre Griffiths, Economic Secretary to the Treasury at the Treasury Committee hearing last month:

“Given the events of FTX and others that we’ve seen in 2022, part of creating that future is getting the regulations right – having no regulations at all or integrating it completely, like it’s it was already an established market and a fact, but to find the right balance.

Likewise, other countries have made themselves more fit in the race to regulate crypto.

India announced earlier this month that it is working on a document to define monetary policies on crypto assets.

Australia announced earlier this month a multi-step approach to tackle cryptocurrency regulation with a focus on strengthening enforcement, protecting consumers and establishing a framework for reform.

Meanwhile, across the ocean, the crypto industry is under attack from the WE government as the latter exploits the banking sector to mount a sophisticated and widespread crackdown on the crypto industry, promoting virtual propaganda from the Operation Choke Point 2.0 in all US financial regulators to deny crypto firms access to banking services.

Operation Choke Point was originally launched by the Obama Justice Department in 2013 to prevent certain merchants from accessing the banking system.

Most recently, on January 3, 2023, the Office of the Comptroller of the Currency (OCC), in conjunction with the Federal Reserve and the Federal Deposit Insurance Corporation, issued the following joint statement:

“…agencies believe that issuing or holding as principal crypto-assets that are issued, stored, or transferred over an open, public, and/or decentralized network, or similar system, is very likely to be inconsistent with safe and sound banking practices.

The Biden administration’s act appears to be the execution of a well-coordinated plan that spans multiple agencies to discourage banks from doing business with crypto companies.

Moreover, since it applies to both traditional banks that serve crypto customers and crypto-first businesses aiming to obtain a banking charter, the overlaid message is quite alarming as it could easily turn into staking bans or classifying thousands of cryptocurrencies as securities and would put crypto businesses out of banking in the United States.

Nic Carter, General Partner of Castle Island, raised his concerns about this in the following blog post:

Is there a light at the end of the tunnel?

The light at the end of the crypto tunnel
Source: AI generated image via AI build tool Midjourney

Where would the crypto industry go from here?

Despite the obvious impact of the above on the crypto market and while its imminent future remains uncertain, cryptocurrency is a vital financial asset shaping the world of fintech and remains a fundamental element in shaping the future. finance.

To conclude, although the stakes are high, as there is a lot to be done on the outcome of crypto framework regulation. thereand, it is too early, if not completely inconceivable, to even imagine a possible final sunset in a market valued at 1,000 billion dollars which is supposed to revolutionize the world of fintech and which should bring to life the future vision of the finance.

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