The first severe inflation since the 1970s and Bitcoin price has fallen 60% in the past year. See the report on October 6, 2022 on the English version, "How to Play Crypto Now: 4 Things We Learned From the Crash."

cryptocurrency crash is not an epitaph of blockchain technology .
cryptocurrency is not dead yet, but its core creed now is to maintain life. Bitcoin is an illusion of inflation fighter has disappeared. The first severe inflation since the 1970s and Bitcoin price has fallen 60% in the past year. The saying that Bitcoin is "digital gold" no longer exists. The performance of gold, the precious metal of , far exceeds Bitcoin, stocks and bonds this year, down only 6%.
However, if the dilemma of Bitcoin is interpreted as a wrong argument for the entire cryptocurrency industry, it would be a big mistake. Etherum, the second largest blockchain, has just experienced a major upgrade, which could drive a revival of crypto activities. Companies supporting other blockchains are still committed to building new systems for financial products , payments and digital assets.
Just as the Internet survived the demise of Pets.com, the cryptocurrency crash is not an epitaph of blockchain technology. In fact, scraping off the garbage is the only thing left is an industry worth re-examining. "In the previous cryptocurrency cycles, your participation has decreased. In the new cycle, more people will use digital assets and build on the basis of blockchain," said Alkesh Shah, cryptocurrency strategist at Bank of America.
investors still need to remain vigilant. Dogecoin ( Dogecoin ), a "Internet celebrity" token that started out as a joke, still retains a market value of $8 billion, close to the market value of companies such as American Airlines Group (AAL). Although the token market has lost $2 trillion in value, a large amount of bubbles still exist. "The durability of crypto assets is questionable," said Eswar Prasad, a well-known digital asset expert and professor at Cornell University. "But this technology does seem to have some durability."
If you are considering investing in cryptocurrencies, here are four lessons for your reference.

Bitcoin is still looking for reasons for its existence

Bitcoin supporters have spent 10 years promoting Bitcoin as a currency that is not controlled by the government, digital gold, and inflation hedge tool, and its limited supply will protect the price of Bitcoin. But Bitcoin has not fulfilled these promises.
In addition, there is little agreement on what bitcoin is: it is nothing more than another set of software rules, a truly revolutionary technology like the Internet, or a quasi-currency that may one day be worth $500,000 per coin (as some bulls think), far higher than the current $20,000. "This reminds me of the allegorical story of a blind man touching an elephant." No one can figure out what an elephant is, because everyone can only feel a single attribute like ivory or elephant skin. "We are slowly understanding what Bitcoin is," she said.
Bitcoin’s role as an alternative asset is still questionable. The price collapse has broken the belief that the cryptocurrency market can withstand the pressure of macroeconomic , which has pushed the Nasdaq Composite Index down 29% this year. The correlation between Bitcoin and Nasdaq (Nasdaq) hit an all-time high in September, with the average of the correlations in the past six months being 0.66, indicating that Bitcoin and tech stocks tend to be consistent.
Despite these drawbacks, supporters like Shah believe Bitcoin and other cryptocurrencies are still viable long-term investments. “People are realizing that digital assets are becoming an Internet operating system, just like high growth areas in the economy,” he said.

is just a flood of big money, and it is not a recognition of

before the crisis. One of the biggest selling points of cryptocurrencies was that it attracted institutional capital from pension funds and venture capital firms. Why do these mature foundations build savings and investments into cryptocurrency companies that build on fragile commitments to income and profits? The mainstream idea at the time was that they wouldn't do that.So this creates a selling point for attracting more funds from retail investors.
But, like many small investors, as the market collapsed, large sums of money were burned. Take Celsius Network, a crypto-loan company, for example, which has attracted more than $20 billion in customer deposits, partly because of the yield on its payments of up to 18%. Celsius Networks is currently operating under bankruptcy protection, its CEO has resigned and thousands of investors are trying to reclaim their savings.
However, eight months before Celsius network stopped withdrawing customers in June, the company raised $400 million in a round of financing, including Canada's second largest pension fund, Quebec savings investment group . "If anyone is very worried that our approach is illegal and not complying with all regulations, no one will put so much money into Celsius," said in a live video broadcast a few days after the financing announcement.
Since then, the pension fund has lowered its investment amount in Celsius. Charles Emond, the head of the 392 billion Canadian dollars ($288 billion) fund , said at an August press conference that the losses were “not even the rounding error of our returns”, and despite his words, he is considering resorting to legal measures after writing off the fund’s $150 million investment, according to the Montreal Gazette. Celsius Network did not respond to a request for comment.
venture capital firm Andreessen Horowitz may also be affected. Horowitz is the biggest supporter of Silicon Valley encryption technology startups. The company has invested more than $7 billion in crypto startups, including $314 million tokens issued by Solana Labs. Solana's token price soared to $259 in November, but it is currently trading at just $33 due to concerns about cybersecurity and scalability. Both Anderson and Solana Foundation declined to comment.
venture capital funds expect most of their bets to fail, while hoping that one of them will become the next Facebook (META). David Nage, portfolio manager at cryptocurrency investment firm Arca, said retail investors should not feel comforted by venture capital being involved with them. "If the fund is large and the check amount is small, the bandwidth and support provided for the project will be quite low," he said.

separates blockchain infrastructure from tokens

Many big companies are betting, and blockchain technology will exist for a long time after pure token speculation disappears. Their idea is that blockchain and related digital assets provide a way to enter new markets—whether it is based on its video games, financial products, or a new iteration of art, music and video repackaged into non-homogenized tokens, or called NFT.
These plans range from subtle to extremely important. On the one hand, Starbucks (SBUX) said last month that it will launch a “digital collection stamp” that will give the most loyal customers an immersive coffee experience, but that is unlikely to bring a company to $33 billion in sales this year.
On the other hand, the interbank information system that handles trillions of dollars in global transactions is testing a system that allows information to be directly transferred. If this approach works, banks can begin transferring funds through blockchain to methods that have been used to transfer traditional funds.
"We are in a winter of cryptocurrency, but we are certainly not in a winter of infrastructure construction," said Will Peck, head of digital assets at WisdomTree Investments (WETF), a ETF supplier. The Wisdom Tree itself is launching a short-term U.S. Treasury fund that uses blockchain—the short-term U.S. Treasury digital fund—to trade. Smart Tree says the fund can provide faster liquidation and settlement speeds.
investing in companies serving the crypto industry is less risky than buying tokens.A prominent example is Silvergate Capital (SI), a bank that is developing services for cryptocurrency brokers, financial companies and other institutions in the industry. Silvergate manages to expand its crypto customer base by the price crash of Bitcoin. The company's net profit is expected to grow 72% in 2023 to $277 million.
The stock currently has a price-to-book ratio of twice, far higher than the average in the banking industry. But Wall Street still likes it: the average target price is $129, which means it will be up 63% from the current price around $79.
Other encryption-related stocks include Signature Bank (SBNY), PayPal Holdings (PYPL), Block (SQ), and Coinbase Global (COIN). In addition to the large digital asset exchange Coinbase, these companies are developing crypto services beyond their core businesses.
Admittedly, crypto concept stocks have been performing badly. Shares of the largest crypto-related company, Amplify Transformational Data Share ETF (BLOK), fell 50%. This is a victory over competitors such as the global X Blockchain Exchange Trading Fund (BKCH), which has fallen by 70%.
Shah said investors should view cryptocurrencies as a way for large companies to prove that their profits can maintain value. He said: "Existing participating companies that embrace this technology, engage in guiding or conducting market education may perform well in the next 5 to 10 years."

regulation is really helpful

Although other banks are also trying cryptocurrencies, most banks are still waiting and watching. A recent report by the Basel Committee (Basel Committee) found that large banks only hold 9.4 billion euros (about $9.2 billion) of cryptocurrency exposure on their books, accounting for only a small part of their total assets. A very important reason behind
is that large institutions will not invest without clear regulatory regulations, but this may happen. Regulators are currently developing rules that allow financial institutions to own cryptocurrencies and provide customers with services related to cryptocurrencies. For example, Senate legislation would direct federal agencies to place most of the cryptocurrency markets under the jurisdiction of U.S. Commodity Futures Trading Commission (CFTCh). Other bills involve whether SEC (SEC ) should regulate exchanges, or whether cryptocurrency banks should obtain Fed core services, etc. Without more regulatory certainty, most companies will not be exposed to cryptocurrencies. Charley Cooper, managing director of blockchain software company R3, said that nowadays, if an executive tries to launch a legally ambiguous crypto product, the company’s attorneys “would be choked to death while having breakfast.”
's regulatory rules that have received bipartisan support in the Senate have a great chance of passing next year. The proposals also appear to be consistent with the industry regulatory framework recently announced by the Biden administration.
is a win for Wall Street to establish a level playing field between cryptocurrency upstarts and banking companies. It could trigger a wave of investment as institutions and consumers adapt to legal protections.
"If there is a market regulated by CFTC, the price of Bitcoin could double," CFTC Chairman Rostin Behnam said in September. It sounds good, right? But even if it doubles, the price of Bitcoin is still 40% lower than its highest price.
article｜Joe Wright
Editor｜Peng Ren
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Original articles from "barronschina" (barronschina) may not be reproduced without permission. See the report on October 6, 2022 on the English version, "How to Play Crypto Now: 4 Things We Learned From the Crash."
(The content of this article is for reference only, and investment advice does not represent the tendency of "Barron's"; the market is risky, so investment must be cautious.)