These days you can’t scroll through YouTube without encountering videos foretelling the end of crypto and the collapse of the global financial system. The clickbait culture that invaded traditional journalism has now spread to citizen journalism too, but how realistic are all of these dramatic claims?
Fear, uncertainty, and doubt (FUD) pervade the mainstream media. So much so that even people with little knowledge of the technology claim it’s all going to zero. If you’re looking for bottom signals this is the equivalent of everyone FOMOing in at the top.
To get a clearer idea of what the next few months hold we spent some time this weekend speaking to some investment bankers in China and Japan. Having previously discussed the markets with European experts, we were keen to get the perspective from another part of the globe.
Starting with the bad news, the outlook for equities looks set to remain volatile for the time being. Traders are expecting a sell-off toward the end of December as people look to realize some losses and offset their tax burden. The decline in liquidity in the markets is anticipated to continue throughout the first quarter of next year.
While many are hopeful of a resolution to the Ukraine conflict in the early part of 2023, analysts are expecting the middle part of the year to be characterized by steady consolidation. Everyone is hoping that nothing crazy happens in geopolitics and it will take until the final quarter of 2023 to restore confidence to most markets.
Providing that the US and China can get along fairly well, that Russia and Ukraine reach a settlement, that China doesn’t invade Taiwan, and that Kim Jong-un doesn’t launch any missiles at Japan the future looks hopeful. The high degree of uncertainty in the global balance of power is weighing heavily on the markets.
Irrespective of which Fibonacci line your favorite token is breaking through, what indicators are flashing for the first time, and what Elon Musk tweets, the overriding factors affecting the crypto markets will be the same as those affecting equities. It’s not to say that there won’t be breakouts and black swans, it’s just that those events will be overshadowed by much bigger events on the world stage.
The good news is that despite the current climate, investment banks are continuing to size up tech companies and Web3 projects with a view to buying in while the markets are low. Although there are still many technical issues to resolve, everyone we spoke with is convinced blockchain technology is here to stay.
Despite China having banned cryptocurrencies it’s heavily investing in the development of Web3 technology. Their Central Bank Digital Currency (CBDC), the e-RMB, has now been rolled out nationwide and central bankers from other countries are watching in delight as Chinese citizens happily adopt the technology.
Although media reports in the west talk about the recent lockdown protests in China many fail to mention that these came after the central government recently relaxed its zero-covid policy. Local governments are yet to follow suit, which is where the anger of the protests was directed. It’s a clear indication that China is moving towards a policy of living with the virus to get its economy back to normal by spring 2023.
In a similar way, western media often report that all cryptocurrencies are banned in China and fail to mention the heavy investment that’s going into Web3 there. Crypto was banned predominantly because USDT posed capital flight risks to the Chinese economy. In a similar way Christine Lagarde, the head of the European Central Bank warned that stablecoins pose a risk to the European banking sector.
China’s approach to crypto is alarmingly similar to the approach taken by western central banks. Although they haven’t banned it yet there are signs of a defacto ban with uncertainty around regulation and the IMF refusing to grant loans to countries unless they ban or heavily discourage the use of crypto.
Meanwhile, the area of Web3 attracting the most interest in China is the metaverse and NFTs. For anyone that believes in the future of remote working, the metaverse is an inevitable extension of our current technology. Just as video conferences are preferable to phone calls, so too fully immersive metaverse technology will be preferable to zoom meetings.
As more of our daily life moves into the digital world there will be a need for two essential pieces of technology. Real-world assets will need to be digitized in a way that prevents them from being counterfeited. For physical objects, we’ll need NFTs and for a transfer of value, we’ll need cryptocurrencies.
It’s obvious to anyone who researches past and present technological developments that the digital world is here to stay. Despite the strong headwinds and uncertainty in the markets over the short term, the mid to long-term is very clear. We just need to batten down the hatches and get through the next few months.