In 2020, the sudden outbreak of the new crown pneumonia epidemic forced the Fed to readjust its policies. After the Fed cut interest rates by 50 basis points in early March 2020, it lowered interest rates to close to zero, and then opened an unprecedented road to money printing.
However, central banks in other countries around the world also followed the Fed and eased monetary policy. This also directly led to the arrival of a big bull market in the history of cryptocurrency.
Since the Federal Reserve and other countries’ central banks madly printed money, the prices of various investment products, including cryptocurrency currencies, have soared, and people have been immersed in the “draft” of the economies of the world.
Since hitting an all-time high of $64,918 in April, Bitcoin has fallen by nearly 50% of its gains. The prices of other altcoins even exceeded the cut, and some even fell back to their pre-bull prices. However, what about the investment prospects of the blockchain and cryptocurrency markets?
Is Bitcoin still worth investing in?
The main reason for the previous surge in Bitcoin’s price came from the macroeconomic environment, which created perfect conditions for the arrival of the Bitcoin bull market.
Bitcoin is no longer a speculative asset, but has become an effective reserve asset. For Bitcoin holders, more attention is paid to its long-term development.
In the recent shocks, Bitcoin whales seem to be buying aggressively, which may make people optimistic that the sell-off may be nearing an end.
According to data from the cryptocurrency analysis company Santiment, since the price of Bitcoin fell below the $40,000 mark in May, the Bitcoin Whale has been buying Bitcoin and has accumulated nearly $2 billion in Bitcoin so far.
Yesterday’s decline may mean a new turning point. Bitcoin’s current support level is $30,000. In the last month’s plunge, Bitcoin briefly fell below $30,000. Once the price is pierced, it may trigger a new wave of selling.
On June 7, there was a large outflow of bitcoin held by cryptocurrency exchanges, which indicated that more and more traders now want to increase their holdings of bitcoin.
According to data from Glassnode, on June 7, the number of BTC inflows into cryptocurrency exchanges was 41,441, and the outflow was 63,992. The net outflow was 22,551 BTC, valued at approximately US$730 million, a new high since November 2020.
The massive outflow of Bitcoin reflects the decision of traders to hold Bitcoin. This means that the Bitcoin spot market will not face too much selling pressure.
However, Bitcoin still has the risk of continuing its downside. Bloomberg Industry Research Analyst Mike McGlone said: “The June 8 drop may mean a new turning point. Bitcoin’s current support level is $30,000. In the last month’s plunge, Bitcoin briefly fell. Below $30,000. Once the price is broken down, it may trigger a new wave of selling.”
As interest rates rise in the future, or the balance sheet is reduced, the crypto market may be affected. However, the Fed showed no signs of intending to raise interest rates soon or begin to shrink its balance sheet.
The huge potential of DeFi cannot be underestimated
DeFi began to explode in mid-2020 and quickly developed into a market with a market value of 100 billion U.S. dollars, and its influence cannot be ignored. So far, the total value of DeFi locked up (TVL) has reached a maximum of 100 billion U.S. dollars. Now it has fallen back. It is believed that it can reach the trillion U.S. dollar level in the future. Now DeFi is still in the initial development stage.
People in the traditional industry initially understood the encryption field and DeFi only at the level of “hype” and “sky-price gains.” After carefully studying this emerging industry, many people began to realize the huge potential of DeFi in the future.
In the past year, the development of DeFi has allowed everyone to see more possibilities of DeFi, not just speculation. At the Hangzhou offline event held by Cointelegraph in Chinese, Belinda, the head of DAOventures China, said:
“In analogy to traditional finance, financial assets on the chain continue to grow and develop. You can see that the DeFi track now has decentralized exchanges, lending, and stable coins. These tracks have some representative projects. Their development allows everyone I see that DeFi has real practical landing and application value.”
After a major adjustment in the crypto market on May 19, a large number of DeFi protocols experienced extreme stress tests during the plunge and also encountered large-scale liquidation. Subsequently, the DeFi protocol based on the Binance Smart Chain was attacked by hackers one after another, with losses totaling hundreds of millions of dollars. Alex, the founding partner of HOT Labs, believes: “The current problem that DeFi has to solve is anti-hacking and the team’s own problems.”
DeFi is a new model of decentralized financial services based on blockchain. The DeFi protocol uses smart contracts to implement various functions in the traditional financial industry, such as derivatives, lending, and transactions.
The birth of DeFi is a challenge to traditional finance to a certain extent. It gives the doubters the opportunity to challenge and reshape finance, and it also gives the profit-receiver a new opportunity to obtain wealth.
In the future, the evolution of DeFi will be extremely tortuous. It is still an earlier market, and the challenges it faces continue to show, including regulatory issues, security issues, and so on.
A&T Capital VP Todd pointed out that DeFi is currently developing quite well and has a lot of infrastructure, but if you compare the current DeFi with the traditional world, many refined things are still not made. He added:
“The entire DeFi track prefers asset and derivatives track to a certain extent. If you can put traditional things on DeFi, then DeFi with a market value of 100 billion can develop to a market value of trillions.”
NFT has unlimited possibilities
2021 is the year when NFT truly rises. The fire of NFT can start a prairie fire. In less than a year, NFT has entered the mainstream field of vision in an unstoppable manner. The average volume of NFTs increased by nearly 300% between January and the end of May.
In March and April 2021, NFT can be said to be popular all over the world. The headlines of major media have reported that NFT turnover has continuously set new records. In addition, many well-known traditional industry companies continue to launch unique digital artworks, which also attracts The attention of the public.
Recently, as the crypto market has been cold, the NFT field has also been cooled. NFT trading volume declined for two consecutive months. At the same time, wallet activity is also showing a downward trend. According to Cointelegraph, the number of active wallets in the NFT market peaked at the end of March, and dropped by more than 40% in May and June because of the decline in value and the Ethereum network. The high transaction costs keep traders out.
This shows that the NFT craze has calmed down. The decrease in active wallets has occurred in tandem with the decline in sales across the field. The price of NFTs being traded by wallets is cheaper.
From another perspective, this may help the NFT market to remove a lot of bubbles and make its development enter a more sustainable and healthier stage, rather than just hype. Traditional enterprises have noticed and accepted many reliable value propositions and use cases of NFT.
NFT allows people to see unlimited possibilities. Kirin Fund investment manager Zihua said: “Bitcoin to the blockchain is a revolution in financial sovereignty, and NFT to the blockchain is more a revolution in digital asset ownership. Today, the total market value of the crypto industry is less than 20,000. 100 million U.S. dollars, if traditional financial funds can enter the blockchain industry, the ecological development of the blockchain can reach a better height and dimension.”
In fact, a large part of the popularity of NFTs is due to the soaring prices of cryptocurrencies. The value of NFT rises with the rise of cryptocurrencies. The high price attracts the attention of industry and outsiders and a large number of users enter the market.
For senior investors in the cryptocurrency field, NFT is a high-quality investment target in addition to digital currencies. The emergence of NFT provides a new option for investors’ asset allocation.
Compared with traditional collectibles, NFT has stronger financial asset attributes. 7 O’Clock Capital believes that many mainstream markets recognize NFT this year. NFT solves the liquidity problem very well. I am more optimistic about the NFT loan mortgage, which can increase the utilization rate of NFT funds more efficiently.
The performance of the crypto market will definitely greatly affect the development of the NFT field, but NFT does not completely depend on the rise and fall of the price of cryptocurrencies. The scarcity behind it is the real value-determining factor. NFT is not a digital asset, but a symbol of ownership. Owning NFT means having a claim on the ownership of the underlying assets.
Author/ Translator: Jamie Kim
Bio: Jamie Kim is a technology journalist. Raised in Hong Kong and always vocal at heart. She aims to share her expertise with the readers at blockreview.net. Kim is a Bitcoin maximalist who believes with unwavering conviction that Bitcoin is the only cryptocurrency – in fact, currency – worth caring about.