Bulls and bears will come and go in cryptocurrencies, just like any market. The key to knowing which coins will beat a bear market is knowing what they are used for and what kind of support they have, according to crypto billionaire Sam Bankman-Fried.
Bankman-Fried, founder of FTX, one of the world’s largest cryptocurrency exchanges, was discussing the prospects for the cryptocurrency market in an interview with Kitco News on Thursday, just as the likes of bitcoin, ether and altcoins alike were found to be in a slump-draft alongside assets. The other risky one, as markets reacted to the emergence of a new variant of Covid-19.
This year has seen a surge in mainstream cryptocurrency adoption, equally with popular currencies like bitcoin and ether, as well as new entrants with real use cases, such as solana and cardano network tokens, and so-called meme coins like dogecoin and shiba inu.
But with US interest rates soaring, inflation rising, and the perception that the economy may be at risk of another wave of Covid-19, the outlook for 2022 is not entirely rosy, which means any potential investor needs to know about cryptocurrencies. Likely to be flexible.
“In general, the projects that you see surviving best are those that have really massive, loyal followings and those that have really important use cases,” Bankman-Fried said.
Solana, cardano and avalanche are small competitors to ethereum thanks to their ability to support smart contracts, which are used in decentralized finance, as well as popular applications such as non-fungible tokens.
Cryptocurrencies are generally more volatile than traditional financial assets, with some, such as dogecoin, rising as much as 100% in a single day, giving up all those gains a week later, as was the case in April. The smaller the market value of a token, the more likely it is to fluctuate.
On Friday, while the Dow Jones index was down 2.6%, the bitcoin price was down 7.5%, while the ether lost nearly 9% and solana’s sol and avalanche’s avax tokens each lost about 10%.
November saw the rise of the Metaverse, an immersive digital world where people play, own virtual plots or race horses and dress their avatars in designer virtual clothes. This has also led to huge spikes in tokens associated with the metaverse.
Decentraland’s Mana token rose earlier in the week, boosted by digital property sales, but fell 4% on Friday, while Axie Infinity, whose hub token has tripled in two months, is down nearly 12%.
“I think projects that seem to be driven by hype are often more difficult. But when you look at projects that either have a lot of real adoption, or that have a lot of real adoption, these are the projects that loyalists will go to even during bear markets,” he said. Bankman-Fred.
Another factor mentioned by Bankman-Fried is that people are looking at whether the coin has an “important future that seems irreplaceable.”
For Bankman-Fried, these ups and downs are all part of the market’s evolution.
“There will always be more crashes, and there will always be more upsides,” he said. “My best guess is that over the next few years, we may see massive institutional adoption of cryptocurrencies,” he said.
“We’ve seen a number of large organizations ‘softly commit’ to using it in one way or another, although they haven’t started implementing it yet. This will likely provide a large pool of inflows over the medium to long term horizon – over the next couple of years. ‘ said Bankman Fred.
A July survey by Fidelity Digital Assets showed that 71% of institutional investors across Asia, the United States and Europe said they would invest in digital assets in the future.