Past, present and future with material indicators

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2022 is coming to an end and our staff at NewsBTC has decided to launch this Crypto Holiday Special to provide perspective on the crypto industry. We will speak with several guests to understand this year’s highs and lows for crypto.

In the spirit of Charles Dickens’ classic A Christmas Carol, take a good look at crypto from different angles, examine its possible trajectory for 2023, and find common ground between these different visions of an industry that could support the future of finance.

Over the past week, we have spoken with institutions about their perception of 2022 and their outlook for the months ahead. Well, start our experts’ tour with Material Indicators, a market data and analytics company dedicated to creating trading tools for the fledgling industry.

Material Indicators: Although we have yet to see the price of trade (traditional finance) in earnings contraction (~Q1’23) for the final leg down, we are already close to the bottom in terms of sentiment.

Material Indicators and their team of analysts measure market sentiment and liquidity and try to read between the lines of what the big players are doing to provide a clear, noise-free view of its conditions and possible direction. Here is what they told us:

Q: What is the most significant difference for the crypto market today compared to Christmas 2021? Beyond the price of Bitcoin, Ethereum and the like, what has changed between that moment of euphoria and today’s perpetual fear? Has there been a decline in adoption and liquidity? Are the fundamentals still valid?

A: The difference is striking! Since the FTX explosion, the influx of new people to Crypto Twitter has dwindled to a trickle. Salty Youtubers will now advise you to sell your leftover coins to avoid total loss. Telegram communities have dwindled. Large accounts that told their followers to buy have quit or rebranded. While we have yet to see tradfi (traditional finance) price in earnings contraction (~Q1’23) for the final leg down, we are already close to the bottom in terms of sentiment.

Q: What are the dominant narratives driving this change in market conditions? And what should the narrative be today? What do most people overlook? We saw a major crypto exchange explode, a hedge fund considered untouchable, and an ecosystem that promised a financial utopia. Is crypto still the future of finance, or should the community pursue a new vision?

A: It’s the other way around. Conditions create stories. Loose monetary policy and abundant cheap credit create bubbles and fuel fraud. It is only after low tide that we see who swam naked. With an impending rise in unemployment, people will try to hide in bonds, which actually improves the availability of credit for risky assets. So while profit-oriented assets will suffer from rising unemployment, credit-oriented assets (risky assets) will feel relatively less pain.

Q: If you have to pick one, what do you think was a big moment for crypto in 2022? And will the industry feel its consequences throughout 2023? Where do you see the industry next Christmas? Will he survive this winter? Mainstream once again declares the death of the industry. Will they finally succeed?

A: Terra/Luna was probably the catalyst for all subsequent explosions and we have yet to see the full effects of the contagion (DCG/Grayscale/Genesis are not yet fully resolved). As with any explosion, this will only invite more regulation that will neither protect investors nor improve growth potential. We wanted institutional adoption and now we see they had no risk management and wasted their user funds.

Q: Finally, on social media, you guys at Material Indicators have made your bearish bias public. Are you more or less pessimistic than at the start of 2022? And what would you like to see to change your bias and lean towards the long side of the market? We know a lot depends on the Federal Reserve, are the chances of a pivot and lower interest rates higher?

A: While we’re probably not quite out of the woods yet, we can almost see the light already. With weak earnings and poor forecasts, bonds will likely catch a bid in Q1’23, and therefore make credit available to risky assets to cushion their fall or even help them recover (especially if the Treasury manages to relieving the RRP of its idle of approximately $2,000,000 liquidity). Bitcoin could also benefit as it is only subject to the availability of credit and not income. However, while inflation has been and will likely continue to decline for some time, it is unlikely that we have seen the end of it. So, keep an eye out for the potential resurgence of inflation in late 23/early 24.

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