Crypto winter may be extended until the physical winter in Q4 and even the early Q1 next year, implied CoinShares Chief Security Officer Meltem Demirors in the latest interview with CNBC. According to data collected by Demirors, no signs indicate that an upside catalyst is in sight, sparking a speedy recovery from the months-long downward trend.
Liquidity problem pushes borrowing rate up
The view of the Meltem Raiders has come as an assessment of the current state of the market, as the major cryptocurrency continues to struggle around the $20,000 level. However, she did not take a positive stance on bitcoin in recession amid the macro backdrop of the Fed’s rate hikes and the falling value of the euro against the USD. More pain is ahead for “tech stocks, growth and crypto,” the CSO added.
Amidst the contagion effect spreading across the industry as lending firms and exchanges fall one after another, the ongoing uncertainty rests upon the magnitude of such a crisis, as well as upon the lack of transparency rooted in some privately-held crypto firms.
“After billions of capital evaporated overnight, liquidity out of the system, we haven’t seen the full impact of that because most companies in the industry are not publicly traded, we don’t so we don’t get the transparency that we usually see.”
In a follow-up Twitter thread, Demirors noted that “a massive void” exists in the industry following the collapses of several lending firms as the demand for such borrowings from the traditional markets remains high. As the pessimistic sentiment keeps clouding the industry, crypto lenders have reduced the amount of capital for lending.
Further, with the growing urgency of stablecoin regulation and the continued reduction in liquidity in the broader market, Demirors said, “rates will rise as liquidity outside the banking system dries up.” , which means access to leveraged positions is rated higher through the coin. marginal products.
For instance, it has been shown in the extremely high borrowing rate for shorting USDT amid the growing suspicion regarding Tether’s underlying reserve status.
“Tether FUD, as always, keep going. USDC FUD is also kicking off now indicating where we are in the cycle, we are seeing trade funds considering a trade called “the widower” which is short USDT via borrowing at 10-12%.”
Shrimps Accumulating While Crypto Funds in Pain
During such an adverse market condition, crypto equities such as Grayscale’s Grayscale Bitcoin Trust (GBTC) have bled heavily as the fund is now trading at a 31% discount to Net Asset Value (NAV). The pain is set to be exacerbated due to continuing sales caused by the incoming 3AC liquidation, Demirors noted.
Meanwhile, retail investors holding less than 1 BTC are actively accumulating the asset as major crypto funds take a cautious approach, with their monthly inflows returning to a modest level after months of aggressive outflows.
