Illusion or reality?Encryption demand is either faltering or gaining momentum

BlackRock is the world’s largest asset management company, so when it CEO Larry Fink recently stated He has “little investor demand” for cryptocurrencies and Bitcoin (Bitcoin) Based on “My last two weeks of business travel”, it sounded some alarm bells.

A commentator had a lively discussion on Twitter comment Considering that “Goldman Sachs, Bank of New York Mellon, State Street, Morgan Stanley have all entered the field in response to demand.” In addition, BlackRock is the second largest owner of MicroStrategy (MSTR) stock and is regarded by many Pure Bitcoin game.

As stated, Bitcoin reached an all-time high of $64,000 on April 14th, but plummeted shortly thereafter, and has now been trading at about half of the April high for several weeks, as do many other cryptocurrencies. The tension of some users is understandable.

Beyond the market cycle

Perhaps it would be better to take a longer-term view of recent events. Bitwise Chief Investment Officer Matt Hougan explained to Cointelegraph: “Two months is a very short period of time for crypto. I’m not sure what to think of Fink’s comments, but they are not in line with our daily work.-A day’s experience.”

“Institutional investors need 12 to 36 months to conduct due diligence,” Jeff Dorman, chief investment officer of digital asset management company Arca, told Cointelegraph, adding further, “They are not grasping the market cycle. They are working hard. Adapt to the asset class to make a commitment for more than 10 years.”

“It is important to remember that the market has risen by more than 200% in the past 12 months, making it the best performing asset class in the world last year,” added Hogan, who claimed to see continued inflow of funds into Bitwise.

In addition, encryption and blockchain technology are a global phenomenon, and people must be careful to draw global conclusions from events in the United States or Europe. According to records, BlackRock is headquartered in New York City. Justin d’Anethan, director of exchange sales at EQONEX in Singapore, told Cointelegraph, “This is not like the crypto winter in Asia”, adding:

“While the price drop will certainly dampen some enthusiasm, we still see a clear interest in encryption and businesses based on encryption and blockchain. If anything, many people see the low 30,000-point stagnation as an opportunity to enter the market. .”

Elsewhere, Cornell University professor and creator of the Avalanche blockchain protocol Emin Gün Sirer, tell Cointelegraph China Recently, hedge funds are not the only institutional participants exploring the cryptocurrency space today: “I’ve been getting connections from retirement funds, […] The movement speed is much slower, but they may control 10 times more dollars, and they are slowly entering the crypto space. “

In addition, Fidelity Digital, an institutional pioneer in the field of encryption, has been actively expanding Recently-due to “strong encryption demand”, the number of employees has increased by 70%, including 100 new employees in Dublin, Boston and Utah as Tom Jessop, President of Fidelity Digital tell Bloomberg. The company saw more demand from retired consultants and companies, and expanded its product range accordingly. Jessop said: “We are seeing people becoming more and more interested in Ether, so we want to stay ahead of this demand.” Fidelity Digital spokesperson Megan Griffin told Cointelegraph:

“We have not seen any substantial changes [crypto] Demand during the period [post-April 14] Downsizing, because institutions tend to hold a long-term perspective and are experienced in cycle management. ”

Dorman emphasized even more. “New investors’ interest in digital assets has accelerated—not slowed down,” he said. “Any slowdown in distribution is more a function of summer than price.”

The dynamics of boom and bust?

Nonetheless, the demand for cryptocurrencies may be seen as a reason for the faltering. JPMorgan Chase strategist said: “There is no doubt that the boom and bust dynamics of the past few weeks represent a setback in institutional adoption of the crypto market, especially Bitcoin and Ethereum.” Say In a report in June.

“Of course, the cryptocurrency market has indeed been going sideways,” Lex Sokolin, chief economist at ConsenSys, told Cointelegraph, adding, “The driving factors are resistance to the mining industry, global macro risk aversion trends, and slower emotional momentum. Some combination. Memetic trading.” But the underlying fundamentals are solid, Sokolin continued:

“We see huge demand from institutional investors for crypto assets and equity in crypto companies. We can point out that FTX’s $18 billion valuation and Bullish’s $9 billion valuation are recent evidence, and they are both hedged by some of the world’s largest hedges. Funding.”

Events that have occurred since the beginning of summer are Hougan admits that this has caused some investors to slow down and conduct more research. While China is banning Bitcoin mining, the U.S. authorities seem to be stepping up efforts to regulate cryptocurrencies, forcing investors to “stop and reflect. The good news is that these two developments are long-term positive for the market, even if they bring Short-term fluctuations.”

Nonetheless, the roller coasters of recent months remind people that BTC and cryptocurrencies have generally not solved their volatility issues. “Volatility makes everyone scared,” Dorman observed, adding, “When you believe in the value of the underlying asset, volatility is more acceptable-this is the biggest obstacle for institutional investors in education. ”

related: Onlookers: If this is a crypto bear market, how long will it last?

The only significant shift that Dorman has seen in recent months is that “new investors’ interest in DeFi, games, and other cash flow-generating assets is much greater than their interest in Bitcoin or Ethereum or ETH competitors.”

“Decentralized finance continues to mature and handle transactions and loans,” Sokolin said, adding: “NFT-based platforms are witnessing major studios and creators turning to new tokenized business models. Like Ethereum The computing chain obviously has an opportunity. We may also see more DeFi-type activities anchored to Bitcoin, Solana or other chains, which will make the whole cake bigger.”

Play the “long game”

However, cryptocurrencies continue to face challenges. “For example, we want to see major new activities in the US regulatory front. If regulators intervene excessively, this may have a major negative impact on encryption,” Hougan explained, while continuing to add, “Of course, the flip side is also true. : If regulators propose balanced regulation, it will lay the foundation for the next great cryptocurrency bull market.”

D’Anethan believes that many technical challenges of cryptocurrency, such as scalability and transaction speed, “have been studied and resolved to a certain extent”, but there is still a need to find the right balance between “network effect” and efficiency ,And noted:

“BTC is a widely accepted cryptocurrency, but technically it is not the best user experience. A new cryptocurrency may be great, but if no one uses it, it will be of little use. This is a self-balancing behavior that still needs to work.”

Overall, the long-term trend remains positive, Dorman said, “We are in a long-term upward trend for decades. […] Every recent challenge is a long-term positive factor—regulation, China’s decentralization, etc.,” while Sokolin called attention to “the ongoing deep investment of mature participants in the long-term game of digital assets. ”