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The cryptocurrency industry spent billions of dollars promoting itself during this year’s Superbowl, including an ad proclaiming “fortune favors the brave” and another featuring basketball star LeBron James urging people to “call your own shots.”
Now reality has set in: inflation is rampant, the world economy is teetering, and crypto prices bounce like a LeBron James dribble down the court.
“We did not see a massive influx of retail investors into crypto after the Superbowl ads,” Noelle Acheson at crypto broker Genesis Trading admitted in a Financial Times interview.
“Volumes are low because of a huge amount of uncertainty in the markets,” she said.
Trading volumes reported by major crypto exchanges offer evidence.
Crypto trading has sunk below $1 trillion every month this year, according to the Block Legitimate Index; in 2021, it topped that number in nine of 12 months. In March, the index recorded $739 billion in trades, compared to $2.2 trillion last May.
Bitcoin notched a value of $69,000 last November, then barely stayed above $33,000 in January. At 5 p.m. on 2 May, it reached $38,546.
The lower volume is due to individual speculators exiting the market, leaving institutional players to take the lead by allotting small portions of their portfolios to crypto and trading less often than individuals typically do, the FT said.
“Bitcoin has been seen by many of the large macro investors as a risk asset,” Acheson said. “When these large funds need to de-risk, Bitcoin is very liquid and trades [24 hours every day], so it’s relatively easy to offload.”
Two groups of investors will dominate the crypto market this year, Chris Zuehlke, partner at trading firm DRW, told the FT. One sells during times of turmoil and the other “buys the dip.”
“Some of the world sees it as a risk asset and trades it similar to high-growth tech stocks,” he said. “Others see it as a risk-hedge asset, a store of value.
“That push and pull between those two camps is what defined that range where we have been sitting the past couple of months,” he said.
Crypto also is giving birth to complex derivatives, Zuehlke pointed out, which excludes a large number of individual investors from taking part.