Despite Shocks, Cryptocurrency Market to Recover in 2024

– Going by the simple laws of economy, the decrease in supply of new bitcoins and the constant demand lead to prices shooting up. Hence, there`s a period of rapid growth every four years or what is known as the “bull market” followed by the period of big decline knows as the “bear market”. The situation was similar in the previous cycles and the same is happening now. In 2017 and 2021 there was a rapid growth and 2018 and 2022 saw the decline in bitcoin prices. Since bitcoin is the first and the biggest cryptocurrency, other cryptos will follow its rise and fall, meaning there is a high correlation between cryptocurrencies on the market. The next “bitcoin halving” is expected in 2024, announcing the full recovery of the crypto market, Radonjanin points out.

Few adverse pieces of news were the trigger for the current market decline. First of all, there is the downfall of on the bigger cryptocurrencies, Terra (LUNA), then the crash of the big crypto hedge fun Three Arrows Capital and the Celsius Network bankruptcy, one of the leaders in cryptocurrency lending and interest payments , our interviewee states. The story starts resembling a film script when back in September Interpol issues a red notice for the founder of blockchain Startup Terraform Labs, whose collapse wiped out USD 60 billion. But the problems don`t stop there.

The start of November saw the collapse of one the biggest crypto exchange platfoms, FTX. Many were surprised by the news because it is one of the largest crypto stock exchange. Because of the size of FTX, many see this as the equivalent of the Lehman Brothers collapse in the banking sector in 2008 which triggered the world financial crisis.

– On top of it all, there is the Ukraine war, that along other factors led to the biggest inflation in the history of the Euro zone and the fears of the global recession. Stock market has certainly felt the consequences. The S&P 500 index, which gauges performance of the 500 of the biggest American companies on the stock market is down by 20% whereas the stocks of some tech giant by up to 70%. That kind of fall has been recorded only once after the big financial crisis of 2020, and that is during the Covid-19 pandemic. Crypto market hasn`t remained immune to these events. What`s interesting is that this is the first time since the start of cryptocurrencies that the “bear market” coincides with the economic crisis, so it will be exciting to follow the market updates in the following months, Radonjanin says and adds that the price decrease caused the lower interest in the cryptocurrencies and the volume of trade on the crypto exchange platforms is down by 70%.

Over 200,000 people uses cryptocurrency in Serbia

It is estimated that more than 200,000 people in Serbia uses cryptocurrency, which is less than 3% of the population. That number is below the global average which is around 5% and it`s far below countries where acceptance of cryptocurrencies ii much bigger, like in Turkey, Russia and Ukraine, says our collocutor.

The reason behind the fact that only a small number of foreign companies focus on the local market is primarily the small purchasing power of the local populace and in part due to local laws.

– In particular, none of the crypto exchanges in Serbia, neither foreign nor local, got a license for legally providing currency exchange so far. There are few local crypto players, however, certain regulations slow down the adoption of cryptocurrency on the local market. One of them is the manual identification of users which means you have to visit the user in person and identify them. There are other options but all of them are far more complicated that in foreign exchange offices where showing a document on your mobile device is sufficient. When the regulations are made simpler and the people get educated on the subject I believe we the number of users in our area will significantly increase, Radonjanin says.

About 60% of energy used for mining bitcoins comes from renewable energy sources

Until that happens, Serbia can safely observe the developments on the crypto market. Certain analyses show that bitcoin uses more energy per year than countries the size of Argentina, which is quite striking when there are calls for reducing energy consumption. Still, companies that deal with crypto have an answer to challenges caused by the energy crisis.

– The truth is that certain cryptocurrencies, such as bitcoin, use a specific type of consensus algorithm – POW ( Proof of Work) which utilizes electrical energy for mining, namely for security and stability of the network and for validating transactions. What is crucial here, and what most people don`t know is that starting this year, over 60% of that energy for bitcoin mining comes from renewable energy sources, such as solar panels, Radonjanin reveals.

In addition, Radonjanin says that because of the global energy crisis, most of the cryptocurrencies today use alternative consensuses for network security such as POS (proof of stake) which uses less electrical energy and instead secure their network by staking crypto tokens.

– The best example is when Ethereum, the second largest cryptocurrency, recently transferred from POW consensus to POS. It should be noted that blockchain technologies is also used for reduction of CO2 levels and improving the environment. Also, due to global economic crisis, the volume of trade has lessened considerably so that a few cryptos still using POW systems use up very small amount of energy, our collocutor says.

Are cryptocurrencies losing state support? – The cases of Russia, China and Spain

Despite the progress, there is a sense that cryptocurrencies are losing support on the state and international level. At the start of 2022, Russia`s central bank has suggested a ban use and mining of cryptocurrencies on the Russian territory stating a a threat ti financial stability, citizens` welfare and sovereignty of the Russian monetary policy. At the same time, Spanish market regulators have imposed severe restrictions on marketing platforms for exchanging cryptocurrency.

Our interviewee thinks that cryptocurrencies are not only not losing but they are in fact gaining the support in many countries and from the largest corporations.

– I have been working in crypto industry since 2018 and everyone who`s been in the market for a while would say the same thing. Russia and China have always had a “love-hate” relationship with crypto. At first, the markets had reacted strongly every time China or Russia would ban crypto (mining or trade). Now it barely constitutes news, and the crypto market has stopped reacting to those announcements. Moreover, various memes related to China banning crypto are now circulating on the internet, Radonjanin says.

Our interviewee further states that both of these big economies work independently on developing state crypto projects.

– It`s enough to say that the Government of China currently possesses over 200,000 bitcoins, valued at over USD 4 billion. Also, 21% of the entire bitcoin distribution comes from China and its is the second country in the world in bitcoin mining. About 11% of Russians owns over 12% of all cryptocurrencies, worth over USD 100 billion, Radonjanin points out.

The decision of Spanish regulators to impose severe restrictions on advertising platforms for crypto exchange, Radonjanin doesn`t consider dramatic. According to him, until recently, this country barely had any crypto legislation.

– Recently, few countries started introducing laws regulating crypto exchange. Spain is just one of them. Legislation isn`t anything inherently bad, it contributes to better safety of investors and increases trust in the industry and that`s something that is much needed for crypto to be widely accepted, says Radonjanin.

Per his words, at the moment there is significant fragmentation on the crypto market and various European countries have local legislation which complicates things for crypto exchange because they have to research legislation in each country and apply in each country separately which is a long and expensive process.

– The good thing is that EU lawmakers are preparing MiCA regulation which will connect all European markets and those companies registered in one EU member country would be able to operate in other EU countries as well. This regulation is supposed to increase safety of investors and we hope that a larger number of banks and retirement funds will adopt crypto after its introduction, Radonjanin believes.

Now is the time to buy, a little each month

Taking everything into account, out collocutor has no doubts about it – he would absolutely invest in cryptocurrencies now. When the market is in decline, people get scared and they usually sell their cryptocurrencies with a loss, Radonjanin explains and advises that the best thing to do then is exactly the opposite, because periods of great decline are the best time for investments.

–“The time to buy is when there`s blood on the streets” is a well-known saying in the investing world. Since the current “bear market” coincides with the general economic crisis, there is no consensus on the bottom end of the market, namely how low will the bitcoin go. Since it is hard to predict the lowest point, the best strategic decision for investors during this time is DCA (dollar cost averaging), namely buying a little each month to get good average price. As the price drops, the monthly capital increases, Radonjanin explains,

He would prefer to invest in bitcoin which is the market leader and one of the first cryptocurrencies that made a recovery. But, there are a few other bigger cryptocurrencies which he thinks have an interesting business model, are working hard on expanding their ecosystem and can grow in the next period and those are Matic (Polygon), Fantom, Chainlink and Chiliz.

– I would also follow developments in the SEC (Securities and exchange commission) against Ripple case, because, if and when they win XRP (Ripple) could explode. Our platform, Veli, will be offering 350 of the biggest cryptocurrencies and users will be able to buy crypto from diverse crypto stock markets from one account, Radonjanin says.

What does the future hold?

When it comes to the future of cryptocurrencies, we are already anticipating tokenization of other investment categories, our collocutor explains. That means that everything that has value, real estate, gold, stocks, will be transferred to blockchain as tokens. The main benefits of tokenization include increases liquidity, trade around the clock and lower sales purchase costs.

–I believe this will be a proper revolution, where in addition to owning cryptocurrency, users could invest in real estate and build diversified portfolio with small amounts as well. As far cryptocurrencies go, it`s still early to tell and I believe that new uses will emerge in the years to come, the same as the internet was once used only for email and today we have social network and virtual worlds (Metaverse), states Radonjanin.

And will the headlines on the downfall of bitcoin from the beginning continue to appear? Our interviewee says that only time will tell whether this currency has reached the rock bottom or if it can continue to fall. Some of the events that can influence its further decline are the official start of recession in America and the rest of the world, the continued rise in credit rates and escalation of Ukraine war. However, as the global economy recovers and inflation is put under control the crypto market will begin to recover like all other markets, Radonjanin believes.

– Will BTC become a thing of the past? Honestly, I don`t think so. Even though there is word that CBDC are threat to bitcoin, I reckon that for the time being, that isn`t the case. Even though there are more efficient cryptocurrencies out there, bitcoin is the first, the biggest and the leader in its market and It seems there is still future for it in the following period. There`s a chance that bitcoin will evolve over time, since there are already multiple bitcoin forks such as bitcoin cash, bitcoin SV and others, Many cryptocurrencies which were popular and among the greatest five and more years ago are not even close anymore to their past position on the market, whereas bitcoin has endured the test of time and stayed number one. Institutional investors still invest in bitcoin the most, but they have as well started investing in Ethereum and several other major cryptocurrencies based on their market cap, concludes our collocutor.

Marija Dedic