Binance remains confident in the future of the crypto industry, despite the current crypto crash. Arguably the world’s largest cryptocurrency exchange says Verdict which continues to see “positive indicators” under the hood despite the dramatic recession of recent weeks.
“Market booms and busts are not uncommon and are an integral part of financial market cycles,” says a Binance spokesperson. “The market downturn will remove the excesses and resetting valuations to more sustainable levels can be seen as a positive. Companies that have a healthy balance sheet will be better able to weather the market downturn as they continue to improve their products, build their business and come out of this stronger.”
In other words: Binance believes that the crypto crash will be good for the industry and will weed out players who have little to offer. The sentiment has become pervasive in the cryptocurrency industry as the crisis has worsened since the beginning of the year.
The optimism may seem misplaced in the face of Bitcoin hovering just above the $20,000 line, crypto darlings like Coinbase announcing massive layoffs, and both Binance and Celsius stopping withdrawals in recent days. But instead of taking a nonchalant approach to the cryptocurrency crash, Binance argues that there are still reasons to be optimistic about the digital asset sector.
“The total cryptocurrency market capitalization has declined in recent weeks, showing signs of a market contraction,” says the Binance spokesperson. “However, market capitalization and token prices alone do not paint the full picture of the health of the overall ecosystem. Looking under the hood, although activity has slowed, we continue to see positive indicators, for example. healthy amount of funds raised, strong institutional interest, and increased ecosystem utility.”
Furthermore, Binance argues that the downturn is not entirely due to the sky-high valuations cryptocurrencies like bitcoin and ethereum have enjoyed in recent years.
“The macro environment has been challenging for financial assets,” says the spokesman. “To name a few factors: interest rate hikes, reduced bond purchases and political turmoil have all contributed to the overall risk-off sentiment in the market. This has affected not only cryptocurrencies, but also traditional assets such as equities and fixed income.”
Binance is not the only one optimistic about the collapse of cryptocurrencies
The collapse of cryptocurrencies follows a period of unprecedented growth for the industry. Bitcoin hit an all-time high of over $68,000 in November 2021, as did several other types of blockchain dosh.
Established players have flocked to the industry as digital assets hit new record highs during the pandemic. PayPal, Revolut, Robinhood, and JP Morgan are just a few of the traditional financial services companies that have launched crypto services in the last two years.
Investment in industry initiatives increased over the course of Covid-19. Venture capital investors pumped $3.3 billion into the industry through 532 deals in 2020, according to data from research and analytics firm GlobalData. Those numbers rose to $26.4 billion raised in 1,010 deals in 2021. So far in 2022, venture capitalists have pumped $11.9 billion into the industry in 613 deals.
Growth like this is one of the reasons why Binance is not the only one bullish despite the crypto crisis. Most of the market players Verdict has spoken with sharing the sentiment that the market implosion will be bloody in the short term but will leave the industry stronger than ever.
“Cryptocurrencies are still considered a risky asset, and since traditional stocks have taken a hit, cryptocurrency’s decline has correlated with the rest of the market,” says Alexander Höptner, CEO of cryptocurrency trading platform BitMEX. Verdict.
“In the meantime, we are learning very important lessons about the crypto market. The crypto market is a truly free market, and in free markets there are no bailouts, because of this some projects fail and only the best ideas survive. I would call this a correction instead of a collapse, because the market, which is still very young, is going through a natural pendulum.”
It is not just companies whose entire business model is based on the continued survival of the cryptosphere that are preaching the second, third and fourth coming of blockchain money.
This week, the CEO of German neobank N26 revealed in an interview with sifted that it is building a crypto trading platform that it plans to launch “in the coming weeks.”
Similarly, payment processing company Moneygram has announced that it has integrated USDC, a dollar-pegged stablecoin, to use as a settlement asset for its cash-to-crypto program and vice versa.
GlobalData is the parent company of Verdict and its sister publications.