This was supposed to be the year that cryptocurrencies went mainstream. Instead, bitcoin collapsed by more than 30% starting in October, inflicting huge losses on investors who had piled into crypto exchange-traded funds at a record pace just months before. What drove that massive selloff? And is the long-term bull case still in play?
We sat down with Matthew of digital assets research at VanEck, who shared his view of the catalysts for this year’s “crypto mini winter,” along with the long-term forces he expects to continue driving crypto adoption.
Prior to joining VanEck, Sigel was a widely followed strategist at CLSA. He walked us though the drivers of the bitcoin selloff, especially the leverage-driven selling that led what he called the largest single liquidation event in crypto history. “There is more pro-cyclical reflexivity with bitcoin, and crypto selling can beget more selling,” he says.
In the longer term, Sigel’s bullish take focuses on growing worldwide applications for cryptocurrencies, the diversification that the coins provide against the dollar and other traditional currencies, and tie-ins with artificial intelligence data centers. Despite the plunge in crypto prices, “long-term investors are increasingly willing to stomach bitcoin’s challenging volatility, [which] is proof of how many other appealing features the asset must have,” he asserts.
Morningstar’s Jeff Ptak has warned that the returns investors could gain from crypto ETFs can greatly diminish due to mismatched timing and sales. Morningstar’s view is that cryptocurrency should constitute just a small slice of a diversified portfolio for investors who intend to hold onto it for at least a decade before selling.