Saxo Bank Fourth Quarter Outlook: The cryptocurrency landscape fades and the noise fades

Abu Dhabi: “The Gulf”
The cryptocurrency scene has been quiet during the summer season, but the broad turbulence in cryptocurrencies has increased the maturity and good performance of this market. Factors such as poor energy supplies and regulatory developments are increasing concerns about future decentralization, while individual traders have only followed these developments from a distance. For their part, institutions are still playing an active role in this regard, making it clear that the world of cryptocurrencies is not just an arena for blockchain enthusiasts for digital transactions and speculative traders.
Anders Nesten, Saxo Bank’s Senior Quantitative Analyst, said: “The drop in bitcoin prices in 2022 is forcing miners to move to countries with low energy prices or to completely suspend their operations. The levels of security and decentralization of the network will decrease as the number of miners decreases; However, we do not see the increase in the level of centralization as a major risk in the coming years. “
He added: “Large government institutions are increasingly concerned about the high computational load of the Proof of Work (PoW) protocol to validate the transactions used by Bitcoin. We expect cryptocurrencies to face a great deal of risk should they Government institutions tend to regulate their processing due to their high energy consumption. This can limit the number of use cases for cryptocurrencies, which negatively affects the levels of demand for crypto technologies. The number of miners is likely to decrease when the costs of bitcoin mining will become more than their selling value. “
He added: “It appears that speculative traders have completely disappeared from the cryptocurrency scene in 2022. Non-fungible tokens are trading at all-time lows.
Institutional interest in cryptocurrencies appears to be the only bright side of the turmoil in the markets, especially as it has not declined as is the case with individual cryptocurrency traders. In recent months, we have seen many large institutions invest in the cryptocurrency market or expand their services, within the digital asset category, despite the significant decline in the cryptocurrency market. “
“The cracks are already starting to appear,” he said. Despite the decline in the number of developers in the cryptocurrency world over the past three months, the huge amounts of capital investments that went into this sector during 2021 and early 2022 can help institutions working in this field to continue for some time.
He concluded: “We see applicability as the most important driver of cryptocurrencies in the next phase, with the ability to move from investing in random crypto tokens and non-fungible tokens to cryptographic technologies with specific uses. Sony is looking to create multimedia content enhanced with non-fungible tokens to offer artists the ability to conclude faster and fairer deals, while GameStop promotes digital ownership in games, relying on non-fungible token technology “.