In the middle of a crypto winter, investors may be enjoying a bright start to the year with the price of Bitcoin, the original and most popular blockchain-anchored asset, up around 30 per cent since the beginning of 2023 to roughly €20,857 this week. Still, experts say a bounce in asset prices does not a crypto spring make.
In reality, warns the veteran UK investor Jeremy Grantham in a research note, crypto assets – after “an unexpectedly large loss of $2 trillion” in 2022 – are behaving much the same as other speculative assets to start the year. “I read about the recent 20 per cent rally in Bitcoin and friends,” Grantham writes, “which was allegedly for exotic reasons. More likely to me this is merely crypto’s usual style of behaving like the most speculative stocks, almost all of which had a terrible 2022.”
A rally of this variety after “a bloodbath” such as last year’s is not an uncommon occurrence, he goes on, and it remains to be seen if it “outlives January”.
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Big figures in the industry are, naturally, certain that it will. Brian Armstrong, chief executive of crypto exchange Coinbase, tweeted earlier this week that the soaring US national debt is making the “bull case” for Bitcoin. The argument goes that if the US continues on this path, then Bitcoin – which is theoretically shielded from devaluation by central banks – will eventually come to be seen as a more stable asset than the dollar.
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That seems a rather hopeful argument, to put it politely, given the damage done to the industry over the past year. Already on the wane before the current bout of gloom set in, trading activity in the still-niche space slumped to two-year lows in the latter months of 2022. There is also a great gap between the optimism of the crypto sphere’s language and its actions. Coinbase, for example, recently announced a second round of lay-offs with a view to reducing its global headcount by a further 20 per cent. Gemini, the exchange founded by the Winklevoss twins of Facebook fame, is in the process of trimming its 1,000-strong workforce by 10 per cent.
Despite the January rally in asset prices, hatches are clearly being battened down and the full bloom of crypto spring seems a long way off.
