Complex Economic Environment Facing the Crypto Market

Previously we spent a lot of time to discuss web3.0 and emerging concepts in the currency circle such as DAO, GameFi, Metaverse, etc., but we did not analyze the market situation. Today, we will simply analyze the current market.

Market Overview

Analysis of bad factors

Many people are well aware of the factors that affect market changes.

1. The epidemic affects the economy. The outbreak of local epidemics causing the market to fall. The most intuitive thing is that people must sell their assets in exchange for fiat currency to maintain a life if they want to live. Even the epidemic will cause prices to rise and fiat currency to depreciate.

2. The U.S. raises interest rates, which means that the U.S. dollar will inevitably flow back to the U.S. worldwide, resulting in the world's dollar cash flow contraction. Companies sell assets to repay U.S. dollar debts and their asset prices fall.

3. Risks in individual countries and regions, such as the exchange rate plunge of the Turkish currency and many other factors, we do not know, but it does not mean that they do not exist.

4. More companies and investment institutions in the United States invest in cryptocurrencies, and Wall Street venture capital invests in cryptocurrencies. They have no beliefs, and some even invest in cryptocurrencies with certain speculative behavior. When the stock market price falls or other sudden risks occur, institutional investors will give priority to selling cryptocurrencies (cryptocurrency can be traded at any time 7*24 hours), thus causing cryptocurrencies to face greater pressure.

Analysis of Positive Factors

Now, we also summarize the bullish factors for cryptocurrencies:

1. The United States took the lead in raising interest rates, but some other countries in the world are generally using different methods in response to the US dollar interest rate hike (partly due to the epidemic, companies have not resumed normal production), which lead to the depreciation of the legal currencies of various countries relative to the US dollar and the sharp decline of the Turkish Lira. Under this situation some wealthy people also convert their fiat currencies in to cryptocurrenies and supporting the crypto industry.

2. Bitcoin scarcity and inflation rate, in the long run, although the number of Bitcoins is constant, we focus on the fact that Bitcoin still has a certain inflation rate. At present, the inflation rate of Bitcoin is less than 2%, which is lower than the monetary deposits of most countries, so Bitcoins is relatively scarce.

3. The rapid development of blockchain technology, blockchain technology has achieved good development and Ethereum 2.0 has also developed rapidly. The combination of Metaverse, web3 and gamefi also enables blockchain to be applied in a variety of scenarios.

4. El Salvador uses Bitcoin as a legal currency to promote the large-scale application of Bitcoin.

5. Cryptocurrency has played a role that cannot be ignored in various economic activities. Top companies and Internet companies cannot bypass the impact of Bitcoin, which will also lead to these companies choosing to support cryptocurrencies in the next few years.

In general, we can see that cryptocurrencies such as Bitcoin may decline in the short term, and even lead to losses for some investors who were chasing higher in the early stage, but in the long run, the crypto market is the next internet.

The next thought - Crypto Bubble

In fact, my guess there is a big bubble burst in the cryptocurrency originated from 21 in July, when the market just recovered from the May and June crash, and later came up in august when discussing with several well-known industry leaders. My personal view is that there will be a very big bubble burst at a certain time point. The bubble burst in the future may lead to the collapse of most of the crypto oriented companies and project teams, but it will also give birth to teams and projects with great influence and i hope this factor will improving the crypto industry.

The reason is relatively simple. We can see that the development paths of cryptocurrencies and the Internet are very similar. In the early days, they have also attracted the attention of a large number of investors in the market, and many new technologies and new enterprises have also been born, and capital has also gathered in this direction.

Of course, this is my personal opinion. Whether or when such a bubble will burst in the future is unknown.