Macro must improve for higher crypto market valuation

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Crypto market valuations have continued their descent from November 2021 highs, but bigger picture narratives have remained forefront.
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Photographer: Mary Turner/Bloomberg via Getty Images

Crypto market valuations have continued their descent from November 2021 highs, but bigger picture narratives have remained forefront, supported by institutional drivers and regulatory progress, says Chris Dixon, a digital fund manager at Think10 Capital.

Traditional financial heavyweights continue to buy crypto but are also becoming more interested in blockchain infrastructure, institutional rails, NFTs, and metaverse related ventures, Dixon says.

Last month, The White House released a comprehensive framework for development of digital assets. It outlined recommendations relating to protecting consumers, investors, and businesses, promoting access to safe and affordable financial services, fostering financial stability, advancing responsible innovation, reinforcing US global financial leadership and competitiveness, fighting illicit finance, and exploring a US Central Bank Digital Currency (CBDC), he details.

In Australia, a recent bill was introduced to address digital asset regulation, encouraging consumer protection, promoting investment, and seeking to protect general interest. Among other objectives, the bill intended to “provide an effective regulatory framework for digital asset exchanges, digital asset custody services, and the issuing of stablecoins, that protects consumers and promotes investment in Australia”.

“We’re still in the adoptive stages of these markets, and the overwhelming upside potential is driven by network effects and accelerated institutional adoption,” says Dixon.

Global markets have seen volatility recently with inflation, recession fears, macroeconomic challenges, and geopolitical instabilities in Europe, impacting investors.

“Like any market, crypto and the digital asset ecosystem is positioned in a broad and complex economic context,” says Dixon. “Macro remains the current core driver and before any significant appreciation can occur, the macro must improve.”