HBAR CEO on Crypto Markets: I don’t think the bottom is in

While Barry Silbert, founder and CEO of Digital Currency Group, says he is buying Bitcoin right now, others are not so convinced the bottom is in. Shayne Higdon, co-founder and CEO of the HBAR Foundation, believes there is more pain on the way.

HBAR Foundation is the investment operation for Hedera – an enterprise blockchain network that has dedicated $280 million in project funding.

Higdon says given the correlation between traditional markets and crypto markets, he does not believe the bottom is in. While at one point crypto advocates promoted digital assets as non-correlated assets to traditional markets like stocks – that has proven to have not been the case:

“I think a few things need to happen for the bottom to hit: 1. Inflation needs to ease, 2. Unemployment needs to stabilize and 3. Weaker US dollar,” said Higdon.

In regards to the long anticipated “Merge” where Ethereum migrates from proof of work to proof of stake, Higdon is a skeptic. If it is not pulled off, ETH could collapse driving crypto markets even lower:

“I’m still skeptical it will happen. It’s been promised for years and continues to get delayed. The merge will reduce the total supply of proof-of-work assets and an increase in proof-of-stake assets but I’m not sure how the demand curve and price will respond. My belief is that the merge is already priced into ETH so we are likely to see the price drop once it happens and so many “bought the news” and are doing all they can to hold,” Higdon stated. “If there were a run on ETH it would rock the crypto market in a big way. I think DeFi, as we know it today, would be forever changed. I don’t believe you can pay out double-digit APY and expect that – as many turn this into fiat (especially in market correction territory), your business model will survive. It’s a Ponzi scheme. Get investors to deposit money and promise huge rewards/returns with zero utility. Once consumers begin to pull their crypto out en masse (similar to a run on the bank) you can’t sustain the payouts and ultimately go under.”

Higdon sees other factors abetting the recent sell off including events. Like many others, the collapse of the TerraUSD algorithmic coin that attempted to be stable – tied to the dollar – has driven holders to move into safer assets:

Do Kwon [Terra – LUNA founder] seemed to believe that having BTC (and USDT, USDC, Avalanche, and Luna) reserves would defend the peg. This didn’t hold true. I think he missed the forest for the trees, i.e you can’t have 80% of your reserves to defend a stablecoin as another digital asset given the volatility — it’s a circular reference problem that was existential.”

And, of course, rising interest rates are creating problems for everyone and all assets:

“The government waited too long to take action. This shouldn’t be a shock for anyone though given the world economy shutdown for so long during the pandemic, but people didn’t feel the pinch because the US government kept printing money. What do you think all these “stimulus checks” were? Free money the government was putting into circulation to keep the economy going. What is/was their plan to take this money out of circulation? Looks like they didn’t have one and we have historic, 8.6% inflation.”

There is a domino effect in place now. Venture funding is drying up because blockchain investors held some or all of their value in crypto which has taken a serious haircut.

“Capital is drying up in all sectors. Only the cream-of-the-crop with proven business models, tempered valuation expectations, and capital-efficient companies and projects will get funded. Unfortunately, bear market cycles are required and many projects, companies, funds will disappear. It’s required for us to continue innovating and growing our economy.”

So it’s a bumpy ride that could last months. Perhaps even a year or more, if Higdon is correct. No one is expecting interest rates to reverse any time soon and with rising interest rates the dollar is getting stronger – not weaker. As for employment, it’s a mixed bag right now. Some firms are firing others are hiring but with a recession around the corner, many expect the job environment will falter sooner rather than later. This is compounded by a complete void of any policy emerging from the White House or Capitol Hill that could help mitigate the faltering economy.

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