Regulatory clarity and an influx of institutional capital are needed for the continued growth of the cryptocurrency market, and 2022 “promises to be an interesting year for the industry.” This opinion was expressed by a partner of The Spartan Group under the nickname SpartanBlack.
0/ In the past few weeks I have been asked repeatedly by investors when crypto winter will come. The last 3 crypto winters have so traumatized the collective psyche of crypto investors that everyone is careful after a strong 2021.
— SpartanBlack (@SpartanBlack_1) December 21, 2021
“In the past few weeks, investors have repeatedly asked me when the crypto winter will come. The last three crypto winters have so traumatized the collective psyche of investors that everyone has become cautious after a powerful 2021,” wrote SpartanBlack.
According to his observations, many cryptocurrency holders took profits after each strong upward price movement. Therefore, it was not observed FOMO and parabolic movement of quotes, as in the previous three phases of the bull market.
1/ Perhaps because of this, we have seen investors take profits after every significant run up in prices. Hence, we haven’t seen the type of FOMO and parabolic move in prices that have characterized the last 3 cycles (2010-2011, 2013-2014, 2016-2017).
— SpartanBlack (@SpartanBlack_1) December 21, 2021
Another noteworthy factor is the increase in institutional capital. According to SpartanBlack, whales have become more disciplined in terms of profit taking and risk/leverage management. On the other hand, institutionals actively entered the market during periods of correction.
2/ The other factor is increasing institutional capital in the market which tends to be more disciplined about taking profits and managing risk/leverage, while at the same time also having a greater willingness to step in when markets sell off substantially.
— SpartanBlack (@SpartanBlack_1) December 21, 2021
The expert expressed the opinion that a powerful catalyst is needed for the parabolic price movement, for example, the introduction of cryptocurrency-friendly rules by US regulators. This will open access to digital currencies for large financial institutions.
3/ My view is, for a parabolic move to occur, we would need to see a major catalyst take place. Examples I can think of are a) US regulators enact crypto friendly regulations that allow mainstream financial institutions to flood in;
— SpartanBlack (@SpartanBlack_1) December 21, 2021
Significantly affect the market can also:
- a sharp decline in inflationary pressures;
- a change in the position of the Chinese authorities regarding cryptocurrencies (which is unlikely).
4/ b) inflationary pressures decline sharply negating tapering concerns, c) China reversing its anti-crypto stance (low prob) These are outlier events but any of the above can lead to a parabolic price outcome for crypto markets.
— SpartanBlack (@SpartanBlack_1) December 21, 2021
According to SpartanBlack, there were signs of overheating in some sectors, including gaming. However, the prices of large gaming tokens and NFTs subsequently corrected significantly.
6/ There are parts of the market where valuations were looking bubbly a few weeks ago eg in gaming (both public and private) But prices of the major gaming tokens have corrected by about 50% or more since. The NFT market has also deflated sharply in the past few months.
— SpartanBlack (@SpartanBlack_1) December 21, 2021
He also noted that DeFi tokens are under pressure from the attention to the segment from the US Securities and Exchange Commission (SEC). Regulatory clarity can serve as a powerful catalyst for the growth of decentralized application tokens.
8/ Meanwhile, DeFi tokens have been major laggards and are currently trading at depressed valuations due primarily to the SEC’s scrutiny into DeFi. I see a Uniswap settlement as being a major catalyst for DeFi tokens that could drive prices up 2-3x, although timing is uncertain.
— SpartanBlack (@SpartanBlack_1) December 21, 2021
In general, according to SpartanBlack, the market cannot be called excessively overheated. There is no ubiquitous FOMO, when “people just buy, without looking at the fundamentals.”
9/ Current conditions do not look like that of a frothy overhyped market. In the FOMO phase people just buy without regard for valuation or fundamentals. The current market conditions can only be described as tentative and the market Is looking for directions for the next move.
— SpartanBlack (@SpartanBlack_1) December 21, 2021
“Current market conditions can be described as uncertainty, the market is looking for direction for the next move.”
Of the positive points, the expert called a strong influx of venture capital into the ecosystem, as well as significant reserves of crypto assets from various projects. These funds are designed to support innovative start-ups.
10/ Further, given the strong inflow of venture capital into the ecosystem, coupled with the billions in treasury funds raised by major L1 chains in the past 1-2 months, there is an abundance of capital to support more startups innovating in the space even if there is a slowdown.
— SpartanBlack (@SpartanBlack_1) December 21, 2021
SpartanBlack expressed confidence that private funding “will not dry up like it did in 2018 after the ICO bubble.”
In his opinion, 2022 promises to be an interesting year for the world of cryptocurrencies. Among the potential future risks, he noted:
- increase in interest rates [центробанками];
- growing geopolitical tensions;
- deterioration of the situation with COVID-19.
Recall that in November, the founder of SkyBridge Capital, Anthony Scaramucci, said that bitcoin would “easily” reach the price of $500,000.
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