Fear not, bitcoin bulls — the current rout will weed out the solid crypto operators from the weak ones. 3 experts explain how

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The crypto market has now lost two crashes in 2022.Getty Images

Crypto crashes are actually profitable in the market, industry experts believe.

Specifically, crashes help “stress test” the newly developed crypto infrastructure, which leads to greater efficiency.

Market trends and concerns about not paying bills around crypto currencies have raised concerns about the industry.

The cryptocurrency market has been booming this year, as major fluctuations have put pressure on some lenders, traders and other operators, leading to even deeper losses for investors.

But crypto owners have reason to keep their power, according to three industry experts.

This is mainly due to the fact that crypto routs and corporate failures move businesses and coins that do not have strong support, or actual use cases, and “bad characters”.

“There are hundreds of firms built on hype and not something. It would be good for the industry to remove them,” Charlie Silver, founder of Permission.io told Insider.

Bear market shakeout

Bitcoin enjoyed prosperity throughout the epidemic. But it dropped by almost 70% in 2022 from a record $ 69,000 last November. Rising interest rates and high inflation, coupled with the Russian war in Ukraine, have prompted investors to avoid risky assets such as technology stocks and crypto, as concerns over the economic downturn increase.

The market has also recently seen two events that cast doubt on its long-term consolidation. In May, the giant stablecoin Terra lost its peg in the dollar. The split created a wave of trading that resolved the wider market and raised questions about the role of stablecoins – thus named after supporting real assets and, as a result, less volatile than traditional cryptocurrency, at least in theory.

Then, crypto lender Celsius claimed that “market conditions” forced him to suspend all transactions in its place, which chased away a second-hand sale that cost billions of digital-asset market value, falling below $ 1 trillion for the first time. 16 months, as bitcoin fell in the lower 18 months.

The story continues

“The bear markets are healthy because they restore the balance to reality and drive away the bad characters. There are many cryptos that are true Ponzi schemes, paying investors only with new investors’ money. If the new money stops the project split,” Silver added.

The Crypto crash gives regulators a wider range of investor protection and risk reduction, leading to innovation and better products and services, according to Lucy Gazmararian, founder and managing partner of Token Bay Capital.

“In the bear market, unreasonable excitement and reckless behavior are no longer rewarded, and entrepreneurs can focus on long-term and build stable and resilient businesses that can better measure when markets turn around and as consumer acceptance continues to grow,” Gazmararian said.

Contagion

One big thing is that if a crypto lender gets into trouble, no one borrows the last deposit, like a central bank, to get in, says Gazmararian.

“In this scenario, in the event of a liquidity crisis, crypto businesses that can be managed smarter have a higher chance of collapse.”

This is exactly what happened during the subprime crisis, when even the largest banks were increasingly wary of lending to each other and the financial system tightened until the central banks intervened.

Lenders BlockFi and Voyager Digital, as well as the crypto wallet Three Arrows – “3AC” – have also been hit by market turmoil. 3AC failed to meet calls from several lenders earlier this month, according to the Financial Times, revealing Voyager, who had lent the fund $ 660 million, in the crisis.

Meanwhile, crypto trading platform BlockFi has secured $ 250 million bail from FTX manager Sam Bankman-Fried following a 20% reduction in its 850-strong staff as it roams the “crypto winter.”

Marcus Sotiriou of GlobalBlock told Insider: “Despite this temporary turmoil, I think the crypto industry will work better over time as careless companies are removed from space so we do not have these system problems as we see them now. “

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