In a recent interview with CNBC, Meltem Demirors, Chief Security Officer at CoinShares, suggested that crypto winter could be extended to the physical winter in Q4 or even early Q1 next years. Demirors data shows that there are no signs of an upside catalyst, which would spark a rapid recovery from the long-running downward trend.
Liquidity issue boosts Borrowing Rate
Meltem Demirors’ assessment was a review of the market situation, with the primary cryptocurrency continuing to struggle around the $20,000 mark. She did not affirm that bitcoin is in recession, despite the macroeconomic backdrop of Fed raising rates and Euro falling in value relative to the USD. The CSO added that “tech stocks, growth and crypto” are in for more pain.
The industry is experiencing a contagion effect as lending firms and exchanges collapse one after the other. However, there are still uncertainties due to the scale of the crisis as well as the lack of transparency in some crypto-firms.
“After billions of dollars have been lost overnight, liquidity out the system, we haven’t seen the full effect of that because most companies in the sector are not publicly listed, so we don’t see the transparency we used to see.”
Demirors pointed out that the industry is experiencing a “massive void” following the collapse of many lending firms. This is because the demand for traditional market borrowings remains high. Crypto lenders have decreased the capital available for lending as the industry continues to be clouded by pessimistic sentiment.
7/ Next, I will be looking at crypto rates + liquidity and source data from the trading desk or quotes by MMs
The demand for loans has dropped dramatically, which has led to yield compression
On the borrower side, the cash bid has evaporated.
Meltem Demirors (@Melt_Dem), July 11, 2022
Demirors stated that, due to the increasing urgency of regulating stablecoins, and the ongoing liquidity loss in the broader markets, “rates are going to settle higher as liquidity outside of the banking system dries out,” which means that accessing leveraged positions through coin margined products is more favorable.
It has been demonstrated in the extreme high borrowing rate to short USDT, despite growing suspicion about Tether’s underlying reserves.
“Tether FUD continues, as usual. USDC FUD is also starting now, which is indicative that we are at the beginning of the cycle. Tradfi funds are contemplating a trade known as “the widowmaker”, which is short USDT via a borrow at 10-12%.
Shrimps accumulate while Crypto Funds are in Pain
Grayscale’s Grayscale Bitcoin Trust has suffered a severe market downturn. The fund trades at a 31% discount on Net Asset Value (NAV) during this period. Demirors said that the ongoing sales of 3AC liquidation will only make matters worse.
Retail investors who hold less than 1 BTC are still actively accumulating it. Major crypto funds, however, take a more cautious approach to their inflows, with their monthly levels returning to a moderate level after months of outflows.
Marla Brooks – Financial Analysis
My name is Marla Brooks, and I am the mainstream behind the”observednews.com” for the powerful and most delicate insights into the latest activities in the financial analysis category. I started my journey as an independent financial consultant. I had approximately nine years of experience in this field. I am free soul so; my passion for exploring the world has taken me to the nations across the globe and given me the chance to report for a portion of the best news associations. Currently, I am a full-time editor as experienced in finance and started to use my abilities.