- Cryptocurrencies are going to recover in 2022 after the broad sell-off in the last few weeks, says an analyst.
- The narrative of Bitcoin as a hedge against inflation is changing thanks to the increasing correlation with macro markets.
- Amid the chaos, projects are launching new offerings ahead of the resurgence in prices.
The prices of cryptocurrencies have left investors scratching their heads on whether the worst of the storm has passed or prices could plunge even deeper. One crypto executive thinks that a strong recovery in the second half of the year is in play.
Crypto will recover in the second half of the year
Jack McDonald, the CEO of PolySign told CNBC that he thinks that the worst could be behind the crypto markets and investors can expect a strong recovery in the coming months. He noted that the falling prices of Bitcoin, Ethereum, Cardano, Solana, and other cryptocurrencies are because they are seen as “risk-on, risk-off assets” with an increasing correlation with the broader markets.
The crypto markets suffered a massive sell-off with Bitcoin falling to $28,000 with billions of dollars liquidated. The decline in prices was exacerbated by TerraUSD’s (UST) de-pegging from the US dollar and the subsequent “death” of LUNA.
McDonald added that the narrative that Bitcoin and other cryptocurrencies are a hedge against inflation is changing. He cited the increasing correlation between crypto markets and the stock market fuelled largely by the war in Europe.
“I do still believe longer term that you would see a disconnect from some of the other market trends but of late it is undeniable that there has been a very strong correlation,” he said.
He added that institutional interests are rising because of the rising beliefs that the markets have reached their bottom. He concluded the interview by stating that the second half of the year would herald a massive cryptocurrency recovery.
“I think the hodlers are going to remain steady,” said McDonald. “I think the real money that’s going to be coming into the space sees the market drawdown as a real opportunity for the longer term and I remain very bullish.”
Taking advantage of the chaos to release new products
Crypto firms are taking advantage of the lull in prices to test the waters with new products for their community. Robinhood’s CEO, Vlad Tenev revealed at the Permissionless conference that the company was on the verge of releasing a non-custodial crypto wallet that would give users full control over their private keys. The disclosure is coming barely a month after the announcement of the release of the company’s first cryptocurrency wallet.
“Whenever people think crypto is over, people build new products,” Tenev said in an interview with CNBC. “Now is actually the best time to build.” He said that the leading products in the space were largely built during the crypto winter.
Aave recently released Lens Protocol, a Web 3 social media platform designed to give users total control over their profiles using Non-fungible tokens (NFTs) technology after its founder was suspended from Twitter.