Crypto hodlers, particularly those who held Bitcoin, rejoiced yesterday as the price of Bitcoin soared from $30,000 to almost $35,000.
Rumours of an upcoming approval for a Bitcoin Exchange-Traded Fund (ETF) by the US Securities and Exchange Commission fueled expectations of future price increases, and resulted in the price of Bitcoin pumping to a 16-month high.
For many long-suffering crypto enthusiasts, this was the signal that they had been waiting for- winter was over, and news of the ETF approval was akin to witnessing the first flowers blooming in spring, and a sight for sore eyes.
Across the board, crypto asset prices were up– Ethereum’s price went from 2,200 to 2,500, Cardano from 0.36 to 0.39, and Polygon from 0.77 to 0.9. Anyone checking their crypto portfolio yesterday would likely have seen a field of green.
Yet, it may be premature to call the time of death for this prolonged crypto winter.
Many of us have probably heard about headcount reductions and layoffs from crypto companies. Personnel reductions are still around, and even big names within the industry are not exempt.
Just today, Polkadot developer Parity Technologies announced a cut of around 30 per cent of their staff, around 100 employees.
In July, Binance also laid off more than a thousand people, as reported by the Wall Street Journal.
In India, crypto exchanges are also laying off employees, citing tax policies and dwindling trading volume.
While many of us may be celebrating the ETF news as a win and cheering as the price of BTC rises, a modicum of caution is also in order.
A linkedin poll by crypto exchange HTX showed that 54 per cent of people see the BTC pump not as the beginning of a bull run, but a bull trap.
Market sentiment, unfortunately, is still a factor in creating a bull market- and if a majority of people don’t believe that the bull market is here, well, how can we say that it really is here?
In addition to the fact that crypto companies may not exactly be in the best shape right now, DeFi protocols are also suffering. In August, DeFi TVL hit a two-year low, and has yet to recover to pre-winter levels.
Confidence in DeFi has not yet recovered, in part due to the unending string of hacks and exploits that these protocols suffer.
According to blockchain security company Beosin, the largest hack of the past three months was the Mixin Network Hack, which saw 200 million being drained from the protocol. This one event alone accounted for 37 per cent of all losses lost to criminal activity in crypto.
To add insult to injury, perhaps one of the most damning problems that crypto has right now has to do with its reputation among the wider public.
Hamas has confirmed to be receiving funding through cryptocurrencies, and a high profile investigation in Singapore has revealed that cryptocurrencies were used as a means for money laundering. The highly publicised case of JPEX in Hong Kong has also made investors wary of even engaging with digital assets.
The combination of these factors have all contributed to tarnishing the image of the crypto industry, and instilling fear in would-be investors.
With fear still ruling the market, the crypto winter can hardly be said to be over. Unless more significant developments occur, it is unlikely that we can say that this bear market is really over.