Qwick Takes: The outlook for cryptocurrencies

This week, Talking Biz News Deputy Editor Erica Thompson reached out to Qwoted’s community of experts to inquire about the future of bitcoin and other currencies after the recent price slump.

Check out some of the top commentary:

Clem Chambers, CEO of ADVFN:

For me it is that simple: sell the bubble, buy the crash and the following crypto winter. I did that after 2017 and I’ve sold the bubble and am waiting to buy the aftermath of the crash this time around.

There will be no hurry because the next crypto winter will be as long as the last and the coming boom will likely be twice as high as this one.

Jahon Jamali, managing partners, co-founder of Sarson Funds:

The advent of the digital asset era started long before the pandemic and will continue to grow long after the pandemic has faded. What the pandemic exposed was the looming inefficiency and access inequality of the legacy financial system. Governments’ monetary policy response to the pandemic only added fuel to this fire, as by all indications we are about to enter an era of heightened inflationary risk. Cryptocurrencies and digital assets are not only a hedge against inflation, but an investment in a more decentralized, accessible, and trust-based global financial system.

Eric Christensen, Chief Payment Officer at Digital River:

Volatility has been a feature of cryptocurrencies from day one, which is why they are challenging for most consumers to use as payment. I prefer to think of cryptocurrencies as an investment, which comes with risk and regulations that vary worldwide. While major players like VISA and PayPal are starting to invest in options for crypto, I think this latest news is another example of why broad acceptance of cryptocurrencies as a form of payment is still a ways off.

Nathan Cox, Chief Investment Officer at Two Prime:

As the dust begins to settle, we are presented with a question of what happens next. The case is strong for higher prices. Traditional indicators like RSI show markets are oversold here. On-chain analytics also show that the Net Unrealized Losses are about 9.5% of current market cap, which is essentially an indicator of how many holders are currently underwater on the bitcoin positions. This is relatively low compared to the 2020 drop where Net Unrealized losses exceeded 44%.

Finally, the Stock-to-Flow model that is largely followed by the bitcoin community would suggest the current bull market has another 3-6 months left to realize higher prices, and this pullback is somewhat common.

Perhaps the strongest case for higher prices moving forward is the continued adoption from traditional finance institutions who likely view this pullback as a buying opportunity. For capital that has been waiting on the sidelines, this is arguably the best opportunity to get into digital assets that they’ve seen since late 2020.

Matt Frankel, Investment Planning Specialist at The Motley Fool (US):

The short answer is that the immediate outlook for cryptocurrencies is volatility, regardless of what Elon Musk says or what the Chinese (or any) government decide to do in regards to regulation. There is significant upside potential in cryptocurrencies, as investor interest continues to grow and payment platforms like PayPal continue to adopt them as payment mechanisms. In fact, 51% of Americans who invest in cryptocurrency bought for the first time in the past year, and another 50 million Americans who have never owned cryptocurrency are likely to buy within the next year, according to a study by The Ascent.

On the other hand, there is significant downside risk when investing in cryptocurrency, as the regulatory environment remains very uncertain, as do the long-term adoption of the digital assets themselves. In short, if you are a believer in cryptocurrency and decide to invest, expect a bit of a roller coaster ride over the next few years.

Zak Killermann, Fintech/cryptocurrency writer at finder.com:

The outlook is bullish overall – we hit a floor that is 50% higher than 2017s ATH. The immediate outlook for bitcoin will depend on many things, including:

• Major news breaks – if any of the top coins are featured in well-circulated news stories or on popular networks we’ll likely see a resurgence into crypto as it works its way back into people’s minds.
• Product announcements at Consensus 2021 – well developed, but less popular, blockchain projects will have a chance to highlight upcoming milestones during Consensus 2021. Network upgrades have helped contribute to Ethereum’s success, so it could do the same for similar projects.
• Announcements on regulations from more countries – further clarification on regulations is a long-term positive thing for cryptocurrency, even if the regulations aren’t always favorable.

Marie Tatibouet, CMO at Gate.io:

Tesla ousting Bitcoin payments and China’s crackdown on mining operations, has triggered a massive sell-off among newbie investors who entered the space a few months ago.

Despite a short recovery this Monday, I am afraid that we may not have factored in the Chinese mining ban entirely yet. When it comes to Bitcoin, the price and hashrate will always be correlated to each other. According to Cambridge University, China accounts for a whopping 65% of the global Bitcoin hashrate. With these pools going offline, this drastic drop in hashrate will inevitably hurt Bitcoin and the rest of the crypto market in the short term.

However, the long-term effects of this move could be primarily positive. Chinese mining companies are already looking to open up a base of operations in countries like Kazakhstan with cooler climates and more affordable electricity. Once they have established their headquarters, the hashrate will be far more evenly distributed, and the whims of a single government will no longer jeopardize a global, multi-trillion dollar economy.

Adam Lowe, Chief Innovation Officer at CompoSecure:

It is challenging to predict if the bull run is over as it could be pushed either way by market and influencer pressure. This correction cleared out a lot of over-leveraged accounts, and futures are already up, indicating there is an appetite for further bull market runs.

While Elon Musk’s comments certainly affected retail investors and traders, I don’t believe these comments affected institutional holders and long-term investors. The change in regulations in China was more impactful from an institutional short-term pricing effect, although I think the effect was overblown.

I believe there will be a significant rebound in BTC value but I don’t think it will hit 100K by the end of 2021. That said, this is extremely hard to predict and may be preempted by outside factors. I believe this is a blip or short bearish cycle. Some poor quality altcoins may not recover, which is fine, but I believe the digital assets that bring utility to the market will continue to rise in value.

Justin Hartzman, CEO at CoinSmart:

Anything can happen in crypto. This is a cyclical market, with its ups and downs. While we’re going to continue to see market cycles, there’s a major difference between this correction and previous ones: today, we’re seeing real projects with real-world use. Save for all the dog coins/projects flooding the market today, there are fewer speculative projects that aren’t much more than a landing page and a whitepaper.

That being said, the industry is having an important conversation being had around sustainability and regulation. The environmental impact of mining must be a top consideration, as it is for every other industry. We’ve only got one planet and every industry faces greater accountability for its externalities.

Even so, crypto is resilient. We’ll adapt far faster than legacy financial systems. We’ll step up to the sustainability challenge, continue iterating towards proof-of-stake over proof-of-work, and keep using renewable energy sources ideally suited for crypto.