The next bullrun of the cryptocurrency market now seems to be upon us, but signs indicate that it could be very different from the previous explosions of 2019 and 2022. Not only has liquidity dropped dramatically, but the ecosystem itself is undergoing significant transformations, with less participation from retailers and a concentration of resources on increasingly institutional products, such as ETFs. These changes could reshape market dynamics, creating new challenges and opportunities.
In recent months, institutional funds have gained ground, shifting their focus to regulated and safer products. Bitcoin-related ETFs, such as those managed by BlackRock, Fidelity and Ark Invest, are attracting significant capital flows. Last Thursday, for example, Bitcoin spot funds in the US recorded total net inflows of over $365 million, the largest since July. This is a clear indicator of institutions’ growing interest in cryptocurrencies. However, the landscape is very different from the one dominated by small investors and speculative projects of a few years ago.
One of the factors that could limit the general enthusiasm is the scarcity of new valuable projects. The days of explosive listings seem long gone, and many recently launched tokens have struggled to make a significant impact. The most recent example is that of Hamster Kombat, a clicker game on Telegram that distributed billions of HMSTR tokens to millions of users, but despite large distribution and initial interest, results on major exchanges such as Binance and OKX have been disappointing. This trend reflects the erosion of retail investors’ confidence in new projects, especially when they offer no real innovation or real utility.
In parallel, venture capitalists, once the driving force behind the crypto sector, are showing signs of impatience. Many are struggling to make significant returns on investments made during periods of euphoria. The lack of solid and innovative projects has reduced the opportunities for returns, leading to increasing caution on the part of institutional investors, who are now looking for more secure and stable solutions, such as stablecoins backed by real assets.
In this context, it is interesting to see how the UStb stablecoin, developed by Ethena in collaboration with Securitize and BlackRock, could represent a turning point. Unlike traditional stablecoins, UStb will be backed by tokenized US Treasury bonds, offering an alternative risk profile to other digital currencies such as USDe. This new offering could catalyse greater institutional participation while reducing market volatility, offering a safe investment option even in adverse market conditions.
However, all is not rosy. Recent statements by SEC Chairman Gary Gensler are a warning to the entire industry. Gensler reiterated that without adequate investor protections, many cryptocurrencies will not survive. The examples of FTX and Celsius, with their collapse due to opaque and regulated practices, are a wake-up call for an industry that, while innovative, has yet to strike a balance between decentralisation and security.
4o
Gary Gensler says crypto will have a hard time with adoption due to a lack of trust because of scammers.
But wasn’t it literally his job to protect the public against such scammers like FTX?
I think the public has a hard time trusting him more than anything 🤡 pic.twitter.com/uTnM5Wh2qd
– Layah Heilpern (@LayahHeilpern) September 26, 2024