Is crypto winter over?
The speakers were Torsten Dueing, head of ETF platforms at HANetf, Bradley Duke, co-founder and CEO of ETC Group, John Freyermuth, crypto research analyst and strategist at Enigma Securities and Tom Bailey, head of research at HANetf
The future forecast of the crypto winter, innovation in crypto exchange traded products (ETPs) and an update on the regulatory landscape were the topics covered in ETF flows webinar with HANetf.
The discussion, with the title Is crypto winter over?began by noting that while the current crypto downturn – also known as a ‘crypto winter’ – started nearly a year ago, broader macroeconomic conditions from early 2022 and the impact of the terra/luna collapse have also contributed to its downward trajectory .
Despite this, John Freyermuth, research analyst and strategist at Enigma Securities, said potential demand drivers for crypto during this period were obliterated by the collapse of terra, which sent shockwaves through the ecosystem.
“During the early days of the Russian invasion of Ukraine, there were some potential bull cases and demand drivers, but those stories disappeared in May when the terra ecosystem collapsed. It shocked in ways we’ve never seen before,” he said.
Bradley Duke, co-founder and CEO of ETC Group added that the collapse was an “important moment in crypto history” that brought many crypto natives back to earth.
“There was a euphoric belief that with crypto and digital assets the rules were being rewritten, that is true to some extent, but what is not being rewritten is the real relationship between risk and reward. It is very well understood in traditional finance, ” he said.
The panel also noted that the terra crash, which caused some ETP issuers to close products that track the coin, has affected what issuers place inside the envelope in the future.
Tom Bailey, head of research at HANetf, said: “Issuing an ETP is not necessarily an endorsement of the coin itself. ETC Group, with whom HANetf works, will always ensure that robust criteria are met to ensure that we do not put rubbish in the packaging.”
Assessing how investors view cryptocurrency in the context of other assets, a recent HANetf survey found that 40% of respondents viewed the asset class as most similar to gold, while 30% said it was most similar to technology stocks.
Year to date, the Nasdaq 100 is down 35.2% versus 51.4% for bitcoin.
Bailey added: “It depends on what kind of asset class you look at crypto as, it’s too early to have a clear idea of how crypto is supposed to behave in different market environments and also compared to other assets.”
A busy year for crypto
Another landmark moment for cryptocurrencies this year was the ethereum merger from a proof-of-work (PoW) to a proof-of-stake (PoS) network.
ETP issuers have responded to the change with ETC Group launching a new ethereum ETP that will rely on the coin’s PoW network. The ETC Group Physical EthereumPoW (ZETW) was launched ahead of the merger on September 16.
Duke said: “It all goes back to transparency, we wanted investors in our ethereum product to have the same opportunities as someone investing directly in the cryptocurrency token.
“We didn’t want to speculate on the outcome of the fork, and we certainly didn’t support the fork itself.”
Regarding future innovation in the crypto-ETP space, Torsten Dueing, Head of ETF Platforms at HANetf, said that regulation will help with this, but additional investors need to educate themselves to start increasing demand for new products.
“When you have a basket of stocks tracking the European market, you have an intuition about which company is doing what, and that really needs to be picked up in the crypto space,” he said.
“Adapting to the demands of the investor base will help drive innovation forward in Europe, but in terms of product innovation, we’re really in the early stages.”
Duke added: “There’s a lot of innovation going on in the crypto space, we’re in the early stages of a remarkable technology shift. Developers will continue to innovate, it’s just a matter of choosing which of those innovations is right for an ETP wrapper .”
To view the entire webinar, click here.
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