Tezos CEO: Cryptocurrency winter will be even heavier

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The crypto winter “will become even heavier” as the market tries to adjust to a world of higher interest rates, according to the CEO of blockchain platform Tezos.

Speaking to a CNBC reporter at the Web Summit in Lisbon, Kathleen Breitman commented on the slide in digital assets, “The prices of many of them were inflated with cheap money and basically backed by VC firms.”

“There was a lot of easy money coming into the system and I think it was artificially undercutting the valuations of these companies,” she noted.

Breitman specifically cited the NFT OpenSea platform, where trading volume slid from $2.9 billion in September 2021 to $349 million in September 2022, according to data from Dune Analytics.

“Clearly there was a phenomenon that peaked and then settled down in the markets, but in the meantime โ€ฆ loaded them with a $13 billion valuation,” Breitman added.

“So I think a lot of cheap money flowed in, prices soared, and there were people trying to justify those valuations, mostly through cheap tactics,” she continued.

On whether the “brake on interest rate hikes by the Federal Reserve next year, as economists expect, could drive the cryptocurrency market to rally, Breitman pointed out that there will continue to be a divergence in valuations of cryptocurrencies and tech securities based on expected benefits from user growth, while not having the ability to use “cheap tactics” to attract users “who come in easily and leave easily.”

“In the last 10 years, when interest rates have been low, the value of cryptocurrencies has not been modelled on this basis, and neither has the value of technology companies,” Breitman pointed out.

Tezos, which Breitman co-founded, allows, among other things, token holders to vote on changes to the blockchain platform before they take effect.

Use of the network increased in 2021, Breitman pointed out, due to demand from the art world, where artists create artwork on the blockchain and trade it. This usage is one of the few sources of organic growth in the industry at large, according to her.

The end of an era for easy money in the cryptocurrency market has been a debate for analysts – in recent months – amid a recession.

Some market participants believe that the recent certain stabilisation of asset prices such as Bitcoin, which has been trading between $18,000 and $25,000 for the past four months after a period of high volatility, is positive for the industry.

Antoni Trenchev, co-founder of cryptocurrency trading platform Nexo, told CNBC that the Bitcoin price is “a strong indication that the digital asset market has matured and is less fragmented.”

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