A well-known crypto analyst, Miles Deutscher, presented his analysis of the five “biggest crypto headwinds” scaring investors away from the crypto market on Friday (March 3).
The Mt. Gox controversy, which will release 142,000 BTC this year, is the first obstacle that Deutscher emphasized. Due to the unpredictability of the relevant factors, it is difficult to make an accurate estimate. Still, according to Deutscher, UBS strategists believe that fresh supply will be “less concentrated” due to payments being spread out.
The Ethereum Shanghai upgrade, which Deutscher observes has been postponed until early April, is the second obstacle. Consequently, there will be increased sell pressure since Validators may now withdraw staked ETH from the Beacon Chain. According to Deutscher, the market prices are in effect through a pre-selloff, who predicts the market would price it in.
The problems at Silvergate Bank, one of the two main banks supporting the crypto business, are Deutscher’s third obstacle (the other being Signature Bank). A regulatory investigation by the DOJ and a $1 billion loss for Q4 2022 were just reported by Silvergate Bank.
Seeing how the main crypto exchanges are separating themselves from Silvergate Bank, Deutscher feels there might be “downstream implications” if there is a “full-scale collapse” because of Silvergate’s tight relationships with crypto companies and USDC. Moreover, it “may have repercussions for how other financial partners choose to incorporate crypto companies,” Deutscher cautions.
Macroeconomic circumstances are the fourth obstacle, and recent CPI and PCE statistics raise the likelihood of rate hikes. According to the crypto analyst, market futures anticipate four further Fed interest rate rises as the “base scenario,” with a 13% possibility that rates would rise to 6% or higher. According to Deutscher, the CPI data released on March 14 will impact the Fed’s decision on March 22.
Lastly, Deutscher talks about the regulatory repression in the cryptocurrency sector. In support of his assertion that the SEC is concentrating on staking products, he cites recent SEC proceedings against stablecoin issuers Kraken and Paxos as instances of the SEC’s “regulation by enforcement” strategy against crypto businesses. “Long term, it’s evident that regulation is essential,” he warns. Yet how the market responds will depend on the kind and level of such regulation.