The future of cryptocurrencies according to Messari

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The downward price trend in the cryptocurrency market is expected to worsen by the end of the year, as on the one hand inflation will remain above 5% and on the other hand policies targeting the industry are becoming more intense, according to the annual report published by cryptocurrency research firm Messari.

Investments are on the rise

However, Messari, looking at the industry from a long-term perspective, points out that institutional investment is growing steadily on a yearly basis despite the temporary downturn dominating the market, arguing that the Web3 revolution will not disappear as VCs continue to increase their investment in the industry.

Opportunities in the midst of crises and traps

According to the research titled “Crypto Theses 2022”, led by Messari’s Ryan Watkins, interest rate hikes by the FED are expected to halt stock market momentum and hurt growth stocks. Given this, cryptocurrencies are expected to take an additional hit to their prices as their correlation to the broader macroeconomic environment increases along with their increased adoption.

Messari’s report suggested that, during the difficult period, investors should avoid trading leverage and shorting digital assets due to the high volatility involved. Moreover, buying too early – in an attempt to take advantage of a price drop – in the midst of a bear market could cause huge losses, Watkins warned.

Increasing participation by institutional investors

Despite the short-term challenge facing the cryptocurrency industry, according to Watkins, the space remains robust in terms of gaining support from venture capitalists and increasing its adoption. It has been shown that the increasing participation of institutional investors in recent years ensures that “crashes of similar depth and duration to 2014-2015 and 2018-2019” may not happen this time around.

As a result, Watkins supported the idea that capital flowing into the cryptocurrency space tends to be invested in blue-chip projects such as Bitcoin and Ethereum.

The collapse of confidence in institutional investors

Messari’s report attributed the upward outlook for Web3 in part to a lack of public confidence in financial institutions. Such a view is far from bipartisan, as 70% of Americans disapprove of Congress and no longer trust policymakers.

Many – particularly new investors – see cryptocurrencies as a “life raft”, an emerging asset based on the thesis that decentralized technologies with embedded financial incentives could offer a compelling alternative to today’s traditional institutions. Thus, growing dissatisfaction has driven investors into cryptocurrency assets, Watkins noted, as evidenced by the massive growth in user finances:

Translated with (free version)

“I have 99% confidence that cryptocurrencies will be an order of magnitude larger by 2030. We are on the brink of a total transformation of the global economy. Something bigger than the mobile phone and perhaps even the Internet itself.”

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