The crypto pendulum swings back to ‘real economic value’: can Bitcoin price survive a recession?

(Kitco News) After briefly hitting $ 17,000 over the weekend, Bitcoin is once again above $ 20,000. But can the price outlook recover as calls for recession grow and inflation continues to dominate market holders? Stablecorp CEO Alex McDougall speaks.

Looking at price forecasts for the rest of 2022, investors should separate the angle of cryptographic technology from the price angle, McDougall told Kitco News.

“The technological aspect of Crypto will do very well in a recessionary environment. And especially if the recession is bad it causes confidence to fluctuate. Don’t forget, crypto was born out of the 2008 crisis,” he said.

On the other hand, McDougall doesn’t see the price of Bitcoin doing so well in a recession. Here’s why: “I don’t think there’s a big push for retail or leakage to Bitcoin in a recession. But at the same time, the institutions that have finally joined are not selling,” he said. “But if there’s a risky event where this version of finance no longer works, that’s where you’ll start to see a real rotation.”

During stagflation, a period described by slowing growth and high inflation, Bitcoin is likely to fluctuate within a price range. “I don’t think it will completely crash into a recession. Instead, it will consolidate for the next round of gains,” McDougall said.

However, if the U.S. economy enters a period of stagnation accompanied by a continuous rotation of risky assets, there could be more pain for the cryptocurrency space, including Bitcoin, the Stablecorp CEO noted.

“Everyone was running like chickens with their heads cut off for the last year, chasing gold coins falling from the sky,” McDougall described. “The pendulum has returned to where the true fundamental economic value is, and instead of making a quantum leap into the future, you’re seeing a lot of projects and companies refocus.”

Despite the crash, there is still enough capital in space to advance these real-value cryptographic projects, he added.

“There are billions of dollars spent on venture capital, but a ton has gone back to ‘take a deep breath, what the core is, what you’re doing in the real world, how the blockchain is really helping.’ what is the fundamental value of what you are building?

On the technology side, McDougall is a long-term bull as he sees it surpassing the future of finance at some point. “Technology has been widely accepted by the world at large, as this is where the future will be at some point, whether now, in five years, ten years or 15 years. And whether it is government or industry driven. There will be blockchain. in the future, “he said.

In the future, the dueling narratives of cryptography will continue to drive prices in different directions.

“Crypto is a completely different fundamental value proposition than stocks. Everyone understands how we value stocks. We could argue about whether it’s this discount rate or this bear market forecast. In crypto, we don’t have a fundamental value thesis that is aligned, “McDougall explained. “We tried a lot of digital gold, it’s money, PQ = MV.”

These narratives often drive prices, and the latest driver of the market has been this dual narrative that cryptocurrency is seen as a technological action but also as a risky asset and a hedge against inflation.

“So you end up with this crazy volatility based on which buyers drive the narrative,” McDougall said. “In an industry as innovative and driven by narrative as digital assets, there is always room for more pain in the short term.”

Additional price volatility will be hard to swallow for the crypto industry because it would likely reveal more signs of contagion effects after the collapse of TerraUSD’s stable currency in early May. In addition, it would highlight the challenges with Ethereum’s centralized lending platforms and equity liquidity services, McDougall said.

“[But] whenever digital assets move, they generally move significantly in both directions. When there are specific and specific events like this, it does not change our macro vision of a future with an adoption growing exponentially more than today and forming a significant part of a more efficient, transparent and open world, ”he said.

For Bitcoin, in particular, McDougall pointed out that its payment currency narrative is done. But his thesis of value storage and Bitcoin being the anchor of the whole industry is getting started. “You need to have a part of your portfolio,” he added.

McDougall spoke with Kitco News on the sidelines of the 2022 Consensus Conference in Austin, Texas, June 9-12. He also contributed additional comments following a collapse in the cryptographic space after the conference.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure the accuracy of the information provided; however, neither Kitco Metals Inc. nor can the author guarantee such accuracy. This article is for informational purposes only. It is not a request for any exchange of goods, securities or other financial instruments. Kitco Metals Inc. and the author of this article does not accept guilt for loss and / or damage resulting from the use of this publication.

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