Crypto Winter: thoughts from Europe



Since its peak in 2021, cryptocurrencies have lost $2 trillion in value. There has been a 70% drop in the price of bitcoin since an all-time high of over $69,000 in November. Earlier this week, the price of bitcoin fell below $20,000 as inflation continues to rise. In addition, many leading altcoins have also dropped more than 60%, including ethereum (ETH) and cardano (ADA), and polygon (MATIC).

Although the market has regained some stability, it shows no sign of returning to anywhere near its highs any time soon. There are still many high-profile issues, and the downward spiral is predicted to continue. Many experts have warned that the crypto market could undergo a prolonged bear market, also known as a crypto winter. 

In any case, the industry’s decision-makers, influencers, and traders continue to play an essential role in its future. Speaking to five individuals in Europe, they said:

Tara Annison – Head of Technical cryptocurrency Advisory at Elliptic

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Tara Annison, Head of Technical Crypto Advisory at Elliptic

Tara Annison, Head of Technical cryptocurrency Advisory at Elliptic. When asked about the crypto winter and her worries, she focuses on the cyclical nature which makes crypto resilient and able to survive. “It’s worth noting that this isn’t the first bear market we’ve seen. It’s also not the first collapse of a huge industry player. The crypto market had seen this all before, survived, and thrived. I keep hearing this cycle of people saying: ‘but this is happening when crypto adoption has never been higher.’ That’s true. But it was also true in 2017/18 winter and still true in 2013/14 winter. The crypto industry is incredibly resilient, innovative, and has a way of bouncing back. So I’m not worried about the long-term impacts of this downturn on mainstream adoption.”

From Annison’s perspective, the future remains bright regarding the industry, she points to the adoption of crypo by leading industries and sectors. “I think we’ll see more nation-states adopting bitcoin as legal tender, especially with the broader macroeconomic outlook and increasing inflation. 

“I think we’ll see a necessary cooling down from the heady DeFi summer with super high annual percentage yields and questionable projects. Paving the way for more innovation and new use cases for crypto. I find that very exciting, although we’ve seen recently and historically that this excitement for creative innovation should be tempered with ensuring investors are suitably aware of the risks.” 

Overall for Annison, the outlook is positive. However, some of the negative ways crypto is being used are more important than the bear market. She points out that the vast amount of crypto activity is licit. A notable amount of illicit activity still impacts businesses and everyday investors. In its annual report, the cryptocurrency tracing company Chainalysis estimates that criminal activities represent 0.34% of all cryptocurrency activities or $10 billion in transaction volume in 2020.

“I think education should therefore be a top priority for everyone in the space so that investors can understand what the red flags are for scams and rug pulls, what the risks of certain assets and protocols are, and businesses can identify code exploits in smart contracts or better capture compliance risks of projects they interact with. While this won’t, on its own, stop illicit activity – if we can reduce the profitability for criminals in the space, then we reduce their appetite to use crypto assets for criminal purposes.” 

However, despite her concerns, she sees many industry opportunities and innovation opportunities. “When people are focused less on the price, they can focus more on building out the world-changing use cases. It also means there’s time to reflect on what we have, whether it works as we want, and pivot as needed. So I think everyone in the crypto space should take this time to double down on what’s working or take this opportunity to pivot as needed.”

[Please note this isn’t an official Elliptic response but a personal take from Annison]

Timo Lehes – Co-Founder at Swarm

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Timo Lehes, Co-Founder at Swarm

Timo Lehes is the co-founder of Swarm a firm providing compliant multi-asset DeFi infrastructure for both institutions and retail investors.

He takes a forward-thinking attitude to the crypto winter, looking at what will be a “game changer”. “It’s time to start real-world onboarding assets, risk-weighted assets (RWAs) to the blockchain,” he explains.

He believes this is an interesting time for the sector to become sustainable and look at its long-term growth.” This is an important way for DeFi to reevaluate its value proposition during market distress. Ultimately, the sector needs to figure out why it is creating the infrastructure to shift the mindset from short-term speculation to long-term investment. RWAs are the clear answer to that.”

“Doing so will simultaneously defuse the volatility and speculative issues of the market while opening up the utility of DeFi innovations to the real world. No longer will it be a game of tokens. Instead, it will mean real tangible assets such as company stocks, debt assets, and even real estate will be able to exist, with a track record of ownership, on an open, secure, and transparent blockchain. “

BaFin in Germany regulates Swarm. They are already deploying DeFi innovation within a regulatory setting so that more assets and participants can enter the ecosystem, redefining DeFi’s value proposition. For Swarm, the current state of crypto should be a clarion call to the industry now to make the next step for the sector’s future.

Diana Biggs – CEO of Valour and the Chief Strategy Officer of DeFi Technologies.  

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Diana Biggs CEO of Valour and the Chief Strategy Officer of DeFi Technologies.  

Diana Biggs is CEO of Valour, the issuer of exchange-traded products providing investors with exposure to digital assets, and the Chief Strategy Officer of DeFi Technologies.  

Similar to Lehes, Biggs takes a pragmatic approach to the crypto winter, seeing this as a necessity for its growth. “The mass adoption of crypto is a marathon, not a sprint. The current market is a stress test for the industry. However, one that is a necessary part of the industry’s growth. As Warren Buffett says, ‘It’s only when the tide goes out that you learn who has been swimming naked.’ We see which poorly designed, questionable projects have been “swimming naked.” These will be cleansed from the industry. Ultimately, the companies that survive this bear market will be the ones who thrive in future markets. In six months, I anticipate that we will be seeing a far more durable blockchain and Web3 ecosystem.”

When asked about her concerns, Biggs speaks on crypto not reaching its full potential and the impact this could have on inequality. “If crypto isn’t able to reach its potential to improve access and transparency dramatically, firstly in financial services and beyond into broader economic systems and applications. Cryptocurrency and decentralized finance (DeFi) are opportunities to address many inadequacies and disparities in traditional finance. We must not only be wary of recreating the existing system simply with new technology but also of power dynamics that may, despite new players, exacerbate rather than alleviate existing inequalities.

As far as Biggs is concerned, there is an optimistic outlook that focuses on the need for a long-term sustainable perspective. “We are still just scratching the surface of DeFi. I believe crypto and blockchain technology will help to address issues from supply chains to wealth disparity. Today, however, we need to focus on refining and improving the industry to be sustainable long-term. Part of that requires testing and learning to ensure we have the right foundations; another is ensuring people have access to participate.” 

“For the industry itself, right now is an opportunity to improve and prepare for the long haul. Projects and innovators are challenged to provide real solutions to problems, producing some of the best advancements in the space.”

CryptoinsightUK – Finfluencer

CryptoinsightUK is a content creator, investor, and educator, covering various topics from Macro Economics to cryptocurrency. With nearly 86K followers, primarily on TikTok, they focus on current affairs and Ripple (XRP), a cryptocurrency token.

When it comes to the crypto winter like Annison, CryptoinsightUK also focuses on the cyclical nature of crypto and gives insight into some of the theories he studies. “In the immediate term, many investors will have lost money or be currently underwater. So, some of these may leave the market indefinitely. However, if we zoom out, we can see that the market seems to follow a four-year cycle for both price action and participation in the cryptocurrency ecosystem.” CryptoinsightUK takes insight from Metcalfe’s law and Reed’s computer program theories to predict what he considers a massive growth in cryptocurrency moving forward. “I feel this is best displayed as a visual and Real Vision’s Technology Adoption Curve below (it’s from last year but still rings true).” 

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Source: – World Bank

However, they also point out that much of the market is speculative. “People who have an understanding are essentially betting that their assets will somehow aid our financial future. I believe any asset that does make the jump from speculative to utility will grow exponentially in price. The crypto market cap as a whole is currently significant. This is the fastest technology adoption and growth we’ve seen in human history.” 

Although it is unclear if the uptake in crypto is indeed the fastest adoption and growth in history, Chainalysis does state that global adoption has grown by over 2300% since Q3 2019 and over 881% in 2021. Their research suggests that the reasons for this increased adoption differ worldwide — in emerging markets, many turn to cryptocurrency to preserve their savings in the face of currency devaluation, send and receive remittances, and carry out business transactions. In contrast, over the last year, adoption in North America, Western Europe, and Eastern Asia has been powered mainly by institutional investment. 

Like Annison, for CryptoinsightUK, the next step is mainstream adoption. “I think at some point soon. We will see a provision for financial institutions to hold a percentage of their balance sheet in crypto. I think we will see different crypto being implemented to aid the progress of the current financial systems. In The long term, I think we will see worldwide crypto adoption through each nation’s Central Bank Digital Currency (CBDCs). Although these aren’t traditional cryptos as they are centralized in nature, they are the next step for the global economy.”

Nevertheless, CryptoinsightUK has some concerns and agrees with Annison’s points concerning illicit activities. “All the scammers in the space create a barrier to entry for beginners. You probably think the whole industry is a scam if you’ve been scammed. I think the technology behind crypto, so blockchain, finding decentralized consensus, and a trustless network, will underpin every industry going forward.”

 CryptoinsightUK is launching a weekly newsletter in the coming weeks. Until then, they can stay up to date with their work on socials @ CryptoinsightUK on all platforms.

Jaro Popowic – Chief Brand Lead at Mercuryo

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Jaro Popowic – Chief Brand Lead at Mercuryo

Lastly, meet Jaro Popowic, Chief Brand Lead at Mercuryo, a crypto-powered payment solution that looks to increase accessibility to transactions. Speaking to him about the crypto winter, he has a positive outlook. “I am more optimistic than pessimistic, as crypto is still in its early stages of development, like the internet in the 90s. You can find so many exciting and different cases of how crypto is used in business and financial systems and even in real life, so the possibilities and opportunities for crypto are just enormous. For example, access to the new financial systems in the regions where many people are still unbanked. 

The main opportunity Popowic thinks is the link and seamless integration of crypto and fiat. “It is essential to educate and ensure that people understand that they can use crypto in their daily lives and businesses; and provide them with easy, secure, and user-friendly tools. We at Mercuryo do a lot of regular research and market screening. One of the recent research projects is dedicated to the adoption of crypto among UK and US markets. Have a look here for some stats and figures.”

However, what does concern Popowic is the speed of regulation and adoption of the crypto technology among the regulatory institutions. “They are very careful and cautious about new technology. This holds consumers and businesses to move forward as they want to use new solutions as soon as possible.” 

Nonetheless, he remains excited about the future beyond the crypto winter. “People start slowly to realize that crypto is not just currency or assets you invest in. But instead, this is a technology and a platform for the new model and types of payment and finance. The current market shouldn’t affect the adoption much as crypto’s new significant use cases are growing rapidly.”

  • Helen Femi Williams is a freelance journalist and podcaster interested in fintech, politics, economics, and their intersections.

    She is the host of the letsgetlitical podcast, a fortnightly show interviewing guests from all different sides of the political spectrum, in partnership with the Mozilla Foundation.

    Prior to this role, she worked as an innovation consultant developing insurtech and fintech products and ideas for brands, startups, and major corporations.

    She studied International Relations at the University of Nottingham (UK and Malaysia).