The Silver Lining
The world depends on credit. If nobody could borrow from anybody, the global economy would reach a standstill in hours, which almost happened in 2008.
We learned to rely on cheap credit. We got used to spending “easy” money from households to banks. The outcome is that if the source of easy money dries up, spending slows down, hurting businesses.
If you think about the tech sector, MAANG (ex FAANG) stocks come to mind. Crypto is highly correlated with tech stock prices, so it’s important to understand what happens with them.
The tech industry is facing the consequences of more expensive credit. They start making less money and have to downsize. For instance, Facebook “dramatically” slows down hiring and lays people off. If such a big company has to do something like this, it’s telling.
Crypto companies follow through with the trend, but they struggle even more. Most crypto startups have few tangibles to offer to investors for evaluation. Hence, the sentiment-driven price action speaks the most. The problem is: it’s difficult to have solid price action if people don’t want to spend even on iPhones.
The silver lining is that despite various optimizations and mediocre price action, investments continue to happen, and existing projects continue to develop, albeit in “survival mode.”
Meta pumps billions of dollars into the Metaverse, and its tech, Move, is quickly becoming the market’s new narrative with projects like Aptos and Sui. Blockchain gaming startups continue to attract attention and money despite having a sharp decline in usage. The industry chugs along.
To summarize, even if we see rough times ahead due to the absence of cheap credit, the industry should be fine long-term. When people want to buy the latest iPhones every couple of years again, crypto will surge like never before because it will be well prepared for the influx of attention.
SIMETRI Portfolio – Flat With the Market
Disclosure: The author of this newsletter holds ETH. Crypto Briefing and members of the research team hold some of the Pick of the Month coins mentioned in the table above. Read our trading policy to see how SIMETRI protects its members against insider trading.
