Saxo Bank on Q3 for digital assets: Cryptocurrencies are currently in limbo
Danish-based Saxo Bank has acknowledged that the current status of the crypto market puts the sector in limbo amid heightened uncertainty characterised by significant price corrections.
The next market price movement will depend on factors like the general economic outlook and possible competition from the continued research on central bank digital currencies (CBDCs), Saxo said in its Q3 outlook report for digital currencies published on July 5.
“Cryptocurrencies are currently in limbo, awaiting changes in the general macroeconomic sentiment, regulation and institutional adoption, not to mention the ongoing research into central bank digital currencies as a potential competitor,” the bank said.
The lender added that critics of the sector believe 2022 has ushered in a crypto winter due to reduced prices and engagement across digital assets applications.
Bear market opportunities
On the flip side, Saxo stated that proponents opine that the current bear market is an opportunity for the industry to rally, considering that it presents room to keep investing and bring stability to the market.
Additiinionaly, the bank pointed out that the ongoing crash in Bitcoin (BTC) prices has wiped out the narrative of the crypto being considered digital gold. As reported by Finbold, Bitcoin recorded its worst quarter during Q2 2022 after losing its value by over 56%, with the price struggling to stay above $20,000.
Notably, the report states that Bitcoin’s position as a possible store of value was altered following the crash of the Terra (LUNA) ecosystem, which saw investors lose millions in investment.
Harsher crypto regulations
Consequently, Saxo notes that the crash will potentially trigger harsher regulations than expected since it has cast doubts on the stability of cryptocurrencies. This comes as different jurisdictions continue to debate the right crypto regulatory framework.
According to the institution, the widespread crypto crash in 2022 calls for all sectors to work in harmony since it has raised questions about whether the industry can sustain the pressure and grow. According to Saxo:
“This requires all parts of the crypto networks to work properly, as well as synergies among these—the crypto traders, the facilitators/developers and validators, not to mention the use cases for the specific crypto token.”
Additionally, the bank noted that the crypto correction had eliminated some market speculators who intended to ride on the soaring market in 2021.
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