Bearish Mode, Crypto Asset Spring Era After FTX Collapsed
TRENDS in the direction of investment can change quickly. From those that rise by thousands of percent, they can fall due to changes in economic trends.
It is felt by several assets that grew in the era of low-interest rates, such as growth stock investment assets and crypto asset investments.
This era hoisted crypto assets such as bitcoin, Ethereum, and doge by 1,725 percent, 2,966 percent to 5,633 percent from 2019 to 2021.
Tesla, Amazon, and Facebook shares also increased during the same period by 318 percent, 149 percent, and 369 percent.
In the era of the two percent interest rate, investors are willing to spend money to buy these assets because the real sector has not yet been able to generate high profits.
Not to mention that the liquidity in the market is very fat, so fund managers can take high risks in hopes of achieving maximum returns.
The condition then reversed when the Fed started to raise interest rates so that risky assets became expensive, and investors began to shun them.
In addition to rising interest rates, the effects of the global economic slowdown have made confidence in risky assets fade away and shift to safe-haven assets, such as the US dollar, or stocks that perform well with cheap valuations, such as commodity-based stocks.
This change has made leading crypto assets such as bitcoin, doge, and Ethereum have plunged as much as 69.6 percent, 52 percent, and 70.63 percent in a year. It begs the question, how far will these digital assets rise again?
Investors are also starting to doubt the assumptions of risky asset enthusiasts like ARK Investment founder Cathie Wood who says bitcoin can penetrate USD 1 million in 2030.
The function of bitcoin as a trade transaction is starting to be replaced by plans for digital banks in several countries to create their digital currency. Central banks, such as Australia, Thailand, and Indonesia, have adopted this idea.
When the function of crypto assets as an alternative transaction is getting smaller, their function shifts as a place for speculation, this has diminished investor confidence in crypto assets after crypto trading providers such as FTX and several crypto asset sellers such as Coinbase have experienced problems.
FTX went bankrupt due to management mismanagement which caused the company to experience a cash fund crisis. It is alleged that FTX often leverages its crypto assets through Alameda Research, which incidentally is a company affiliated with FTX.
Meanwhile, Coinbase was also affected by negative sentiment due to investor distrust of crypto exchanges. Coinbase shares fell after the FTX case broke out.
Investors are worried that a liquidity crisis could turn customer funds stored at Coinbase into company assets so that investors will be considered unsecured creditors. The creditor will be the last party to be paid in a crisis.
It concerns Indodax CEO Oscar Darmawan, who emphasized the need to audit crypto wallet organizers in Indonesia by the Commodity Futures Trading Supervisory Agency (Bappebti). He may be trying to be vigilant so that the cases that occurred at FTX and several crypto exchanges do not ensue in Indonesia.
The crypto exchange work pattern is similar to the Indonesian stock exchange stock brokers. When the minimum capital of a stockbroker is reduced from the minimum standard requirement, the broker will be reprimanded and suspended because of the potential difficulty in providing loans (leverage) to investors and making it difficult for investors to withdraw funds.
In the end, the lack of cash funds experienced by brokers can endanger investors because the money is threatened to be used for operational costs for the broker.
The conditions for Exchange Members (AB) on the Indonesian stock exchange are relatively safer than those of crypto brokers whose regulations are not strictly regulated. When the coin made by FTX fell, it turned out that speculation arose that FTX created pseudo-trading to increase its crypto assets.
Not to mention that FTX, as a crypto exchange, can make its coins. Something that is not found in the capital market when AB has a company listed on the trading board. It is dangerous for investors because the ups and downs of assets are influenced by a specific dealer, not a market mechanism.
The risk can be minimized using the Unusual Market Activity (UMA) method and suspension in stock trading.
Investments in the capital market are closely monitored by regulators such as the Financial Services Authority (OJK) and the Indonesia Stock Exchange (IDX).
Even then, there is still fear, such as the actions of fraudulent issuers in conveying financial performance or the actions of stock dealers who fry stocks with poor performance with confidence in prospects.
There is always a loophole for playing money games amid strict regulations. Many big investors also experience losses when investing in delisted stock markets.
That is also what makes retail investors have to be vigilant when investing because it is not easy to maintain consistency of return on investment.
The Indonesian capital market has provided a security mechanism for companies doing delisting. Meanwhile, investors whose assets have been burned in crypto cannot find a logical answer other than weaker demand.
Even when the valuation of crypto assets is close to zero, crypto investors do not have a suitable option to save their investments. Investors must understand that investing in a business should have a mature strategy and planning under fair and transparent supervision.
When will crypto spring end?
There is a prediction that crypto assets will rise again after the Fed cuts interest rates. This condition occurs if the US experiences a recession which causes the Fed to need to cut interest rates to turn the wheels of the economy.
This condition could occur in 2023 when economists predict the US will experience a recession; when the economy recesses, funds are usually distributed more quickly to financial instruments than the real sector.
Then the potential of crypto could emerge from the metaverse developments developed by META and other digital giants. Metaverse developments tend to be friendly with using crypto assets that cross borders and are used in several projects, such as Ethereum and bitcoin.
The development of NFTs has also fueled demand for crypto assets such as Ethereum. Crypto assets will remain relevant as long as they are used massively in a robust digital ecosystem.
Then what becomes homework is crypto regulation which cannot be done in a centralized manner even though the effect of decentralizing rules with global products makes the problems that befall FTX-based coins spread to other countries.
Because of its global nature, crypto-based trading is very fluid. Bappepti efforts to deal with crypto problems cut off the circulation of FTX-based crypto assets when issues arise.
So far, the total FTX-based crypto asset transactions have reached 0.038 percent of the whole crypto transactions in Indonesia, which reached IDR 279.8 trillion or IDR 1 trillion.
In this case, crypto investors need to get transparent and fair game rules to provide security so they do not become victims of manipulation or scam practices in the financial markets.
#FTX
#Bitcoin
