The Crypto Explorer: Crypto market outlook report
Welcome to the latest episode of The Crypto Explorer, a podcast by Sygnum, which takes you into the exciting world of crypto assets and future finance through conversations with leading figures in blockchain and finance.
In this episode, host Aliya Das Gupta and Katalin Tischhauser, Sygnum’s Head of Investment Research, dive into the Sygnum Crypto Market Outlook report, summarise the events of the last year and our outlook for the year ahead for the crypto markets. This episode is the perfect format if you prefer a 30-minute podcast that highlights the key takeaways rather than reading through our 28-page report. Listen to the full episode here.
Aliya Das Gupta: We published our Sygnum Crypto Market Outlook report in January 2022, and in this podcast, we summarise key takeaways from the report for the past year and the year ahead.
Looking at the past year – the year that was called annus horribilis – what are your key takeaways from 2022?
Katalin Tischhauser: It was quite a year and an unusual one. The end of the previous year started with this narrative shift. For about a year or two, the only thing you could hear in the crypto and mainstream media was that crypto is a macro hedge. Corporate treasuries were buying crypto as a hedge because the macro was looking rather fragile. Now, it looks even more fragile than it did then. If you needed a macro hedge then, you need that macro hedge even more now.
Many opinion leaders and prominent voices were repeating the narrative that crypto is a macro hedge. Almost overnight, the narrative changed to “crypto is a risk asset.” What is surprising and strange is that if you look at the timeline, the “crypto is a risk asset” narrative appeared in the media before crypto started behaving like a risk asset. So, the narrative actually preceded crypto behaving in a correlated manner with risk asset classes such as equities by almost two weeks. Consequently, a large part of the year macro hedge funds and prop trading desks were trading crypto as a macro proxy.
Actual crypto-specific news hit the radar later – a bit further into the year – and the market was moving very much with the macro up until then. At the time, a lot of market voices including ours were pointing to all the crypto fundamentals that at the beginning of last year were still of very strong carried over from the previous year: this included the user growth, the number of use cases and the institutional build-up. Ultimately, crypto did decouple from the macro hedge narrative, due to various shocks events in the market starting with the failure of Terra, followed by losses at centralised lenders and continuing with the collapse of FTX. Overall, the big market moves were not macro correlated.
Aliya Das Gupta: So what you are saying is there were two elements connecting these events: crypto moved away from being considered a macro hedge, and secondly, the losses were primarily linked to centralised entities.
Katalin Tischhauser: In fact many of the events could be traced back to bad actors at centralised or private corporations. In fact, decentralised infrastructure did not break and did not have to be bailed out: it worked as expected and proved to be quite resilient. The year was a strong proof-point for decentralisation, transparency and the ethos of crypto.
Now it is also becoming apparent that 2022 saw a failure of centralised entities and a failure of regulation, even with the Terra collapse which appears to have been influenced by FTX market manipulation, based on investigation by the US Department of Justice. Several of the entities that failed following Terra were regulated, including FTX, which held multiple licences, including a MiFID licence and three CFTC licences.
Aliya Das Gupta: Before we jump to what to expect in the year ahead, maybe we can spend a few minutes talking about what hasn't changed.
Katalin Tischhauser: The opportunity has not changed at all - for the technology to deliver tremendous savings and reduce friction across the economy. Trustless systems are very valuable, and technology that creates trustless systems is potentially transformational for the world. This has not yet been done and is still in very early stages.
Basically, every system where you need trust creates a lot of middlemen, friction, delay and cost. Then it has to be overseen and regulated; however, transparency is better regulation than regulation. It can enable cost savings, time and efficiency.
Listen to the full episode with report author Katalin Tischhauser, Sygnum's Head of Investment Research, here.
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