Cryptocurrency Bull: This “crypto winter” Is A Warm One

A crypto winter is here but it’s going to be a “warm winter,” according to one crypto bull.

Bitcoin may have fallen by more than half from record levels. However, “there’s so much more than that,” said Edith Yeung, a general partner at Race Capital.

“In some sense, the ‘warm winter’ is basically going to push out everybody who really wants short-term gain.“

The term “crypto winter” refers to a prolonged period of depressed digital coin prices in the market.

The Cryptocurrency Winter And Web3

Cryptocurrencies have lost around $1.9 trillion in value since the height of a massive rally in 2021. Bitcoin, the world’s biggest digital coin, is about 68% off its all-time high of nearly $69,000 in November.

Yeung said she remains bullish long-term on digital tokens because its appeal lies in the fact that “crypto is really about Web3.“

Web3 has become a buzzword among those in the crypto industry. Proponents say it’s the next generation of the internet, one that is “decentralized” and not owned by a few big technology giants.

Advocates suggest that crypto and blockchain technology could be a big part of that. For example, a Web3 service may run on a particular blockchain such as ethereum or solana. Users may be required to hold tokens associated with those blockchains in order to use a particular service or even have ownership in that app or company.

Cryptocurrency’s troubles

Yeung suggested a “warm winter” for the crypto market, but the troubles for the industry have so far been unprecedented. Investors using trading bots like Capitalix are also not in the clear.

The nearly $2 trillion plunge in the value of cryptocurrencies was sparked by the sudden collapse of an algorithmic stablecoin. A coin called terraUSD, which saw its sister token luna become worthless. Several crypto firms, including the now-bankrupt hedge fund Three Arrows Capital, had a large exposure to terraUSD.

Meanwhile, lending firms like Celsius, which took on risky trading bets, faced liquidity issues and also filed for bankruptcy.

These issues have led to contagion across the cryptocurrency industry. James Butterfill, head of research at CoinShares, is one skeptic of the term “warm winter”

The crypto winter has been “brutal,” he said, citing the fall of Three Arrows and the drastic drop in bitcoin prices.

“Bitcoin prices have fallen by 74% peak to trough at one point – this closely matches the 83% decline seen in 2018. And must be taken in the context that the market is significantly bigger and has a much broader investor base now than it had back in 2018,” Butterfill said on Monday.

The biggest challenge right now for crypto lies in the uncertainty surrounding the Fed’s monetary policy. There is also uncertainty, If the central bank will slow the pace of interest rate hikes, said Yuya Hasegawa… A crypto market analyst at Japanese crypto exchange Bitbank.

Bitcoin vs ether

Ether, the world’s second-largest cryptocurrency after bitcoin, is the token native to the ethereum blockchain. Sol is the native cryptocurrency of solana, a public blockchain that supports decentralized finance apps that aim to recreate traditional financial systems, like banks and exchanges.

Asked if ethereum has stronger underlying fundamentals than bitcoin, Yeung from Race Capital said the two cryptocurrencies are “very different.”

Ethereum and solana are blockchains that position themselves as a platform developers can build apps on top of. Bitcoin meanwhile was set up to be a payments service and so is different to Ethereum and Solana.

Ether has so far massively outperformed bitcoin since both digital coins bottomed in June due to a highly-anticipated ethereum network upgrade.