Report Finds Optimistic Mood in Crypto Community Post-Crash

A new report from Acuiti finds that the majority of its Crypto Derivatives Expert Network remain optimistic over the future of cryptocurrencies, in spite of the “brutal” price falls and high-profile company failures that followed.

While Acuiti says its Q3 survey of its network finds that most viewed the price declines as “a painful but necessary step in the market’s evolution towards greater credibility”, those surveyed also agreed that the last six months “have done little to improve the asset class’s reputation among sceptics”.

Recent events in crypto are seen by the network as “a clean out that sets the stage for more sustainable and robust bull markets”, however it will also bring, according to some 60-odd percent of respondents, a more severe regulatory approach. Around 50% expect the market to move closer to a TradFi infrastructure – which kind of begs the question ‘where is the value in the technology underpinning these assets?’ and slightly less expect crypto exchange consolidation.

Inevitably, given the wipeout of retail investors, around 40% expect a major reduction in retail investment, but only 13% thought the price crash would put off institutional investors. As always, there is a focus on the price of Bitcoin and only 18% believe that it will not return to the $65,000 level and beyond, although there is a diversity over when, with a (some might say desperate) minority saying it will be this year. Should Bitcoin resume its rally and look at $65k, it is reasonable to expect, however, retail investors to be a big part of the rally – especially if institutional investors are to continue to tiptoe into the market.

The inherent optimism of the crypto evangelist is highlighted by two excerpts from the report – the first being a network member stating the current trading range will either prove to be a floor to catapult from, or the setting of a longer-term value. Unsurprisingly, the member, who clearly has no thought of a further decline in crypto prices no matter what, expected it to be the former.

The second excerpt is a quote from a native hedge funds which observes that although crypto has crashed, “the underlying technology will find its use and some coins, either existing or yet to be created, will be amazing investments”. To some, the fact that the technology is yet to find a use more than a decade after the launch of Bitcoin, would be part of the challenge facing cryptocurrencies. Equally, the report finds that the appetite for exposure to AltCoins is flagging.

Flying in the face of the optimism over prices, only 6% of those surveyed believed that the period of pain for the crypto industry is over, with 75% believing there will be a “few more major failures and defaults” and 19% that there will be more than a few. So 94% of respondents believe that there will be more failures, which does not necessarily align with the outlook elsewhere in the report, in turn suggesting there is still uncertainty in the crypto world over the next 12 months.

This is reinforced by the response to a question over whether or not crypto prices will remain correlated to those in equity markets, with 53% saying correlation will remain and 47% that they will decouple again. Clearly, with the correlation weakening the case for crypto as a diversification play, the bulls are hopeful the 47% are right.

Furthermore, when asked about where they are storing non-invested capital or margin following recent events, the only venues where the network was significantly increasing exposure were traditional prime brokers (18%) and fiat currency (17%). One third reported having significantly reduced exposure on spot crypto exchanges. DeFi pools and native borrowers/lenders have also noticeably fallen out of favour (27% significant reductions for each).

There is still considerable optimism over Stablecoins, in spite of the collapse of Terra and its impact on the crypto world, the survey finds that only 3% of the network believed that recent events would lead to a permanent lack of faith in Stablecoins and, interestingly, only 15% though central bank digital currencies (CBDCs) would replace Stablecoins. Unsurprisingly, after the Terra fiasco, only 6% thought algorithmic Stablecoins had a future.

Overall, the report reinforces broader opinion that regulation is coming to the crypto world (the network believes the EU is likely to be first mover), but it does offer the odd paradox, as noted earlier. Another irony is the growing belief that banks and TradFi will play a much bigger role in crypto going forward, with only 35% believing banks will have no engagement with DeFi. Crypto was established as a hedge against everything fiat and to provide an alternate financial system – how ironic then, that one network at least, believes TradFi will ride to its rescue.