Ayoub Arbi, Expert in crypto and blockchain technology, for La Presse: “The cryptocurrency market is going through a period of recession”

Cryptocurrency appeared in 2008, with the conception of Bitcoin, the first digital currency. Today this market is going through a period of recession.
More information with Ayoub Arbi, Expert in crypto and blockchain technology

Do you believe that the cryptocurrency market will disappear in the long run?

The golden rule for success in any financial market is to accept that no one knows the truth about the direction of a financial instrument, especially when talking about the short and medium term. The crypto market, being one of the financial markets, obeys this rule perfectly, especially with the fluctuations that occur from day to day. On the other hand, the fundamental view gives us a negative situation for this market, based on political, economic and health reasons.

Why is this market in recession?

At the moment, the crypto market is in a period of recession after experiencing a decline of more than 70% from the peaks of November 2021 and a free fall of 50% since March of this year. Especially since we have been in a row and monotony of prices since the summer when the price of bitcoin ranges from 18 to 25 thousand US dollars.

How To Trade Futures Markets?

Most of the crypto and web 3.0 community hates a fight especially when it comes to price gouging. On the other hand, only one segment prefers these types of ranges to exercise quick profits in short time frames, as they could buy at low around 18k and sell at 25k. That said, this type of operation remains risky, especially for novice traders, as unforeseen events can occur and cause them to lose a lot of money. My advice to investors is mainly to wait for the right moment, i.e. the moment when the trend is clear (either bullish or bearish). A break of this range can go either way, either down towards the $10,000 to $12,000 area or up to $30,000 which is the average price for many financial institutions or whales (nobody physical or moral who owns more than 1000 bitcoins ). My preference is always to have liquidity to be ready for all situations, so I find it wise to spread our money across different price points. I will give you some examples to better illustrate the situation; 25% for bitcoin price at USD 19k, 25% when bitcoin price reaches USD 15k and 50% when bitcoin price reaches USD 10k. In this way, we can limit our exposure to risk, this is just a simple example and I advise to further divide our portfolio into different cryptos that have real solid projects to maximize our profits.

What should informants apply to identify a range in the financial markets?

From a technical point of view, it is quite simple to identify a range in the financial markets. We need to use the Japanese candlestick chart available for example in “Tradingview”.

During a range we will have: relatively small candles, without a tail, which indicates a small fluctuation in price. An area that the price cannot cross, on the rise, which is called “resistance” and an area that is falling, which is called “support”. And low transaction volumes.

How to create “day trades” in the markets?

“Trade” in its general sense means exchange, i.e. buying and selling. Currently, people use exchanges or “brokers” to conduct these types of transactions. “Trading” can be classified by the type of market used by the “trader”.

First of all, there are primary markets through centralized exchanges such as “Binance”, the “Kucoin” platform or “ByBit” which offer a primary market called “spot”. There it is possible to buy and sell crypto at the current price and the amount of money that the person has in his possession. The same is possible in decentralized exchanges like “Pacakeswap”, “Uniswap”, “Sushiswap”…

There are many secondary markets, but the most commonly used on centralized exchanges are futures and margin contracts. Margin trading is a method of trading assets using funds secured by a third party. Compared to regular “trading” accounts, margin accounts give traders access to larger amounts, allowing them to leverage their positions. Basically, margin trading amplifies trading results, so traders are able to make bigger profits on successful trades. This ability to amplify profits makes margin trading particularly popular in low-volatility markets, including the international Forex market. However, margin “trading” is also used in the commodity stock and cryptocurrency markets.

In traditional markets, borrowed funds are usually provided by an investment broker. However, in cryptocurrency trading, funds are often secured by other traders, who earn interest based on market demand for margin funds. Although less common, some cryptocurrency exchanges also offer margin funds to their users.

Crypto-futures are contracts that represent the value of a specific “cryptocurrency”. You do not own the underlying cryptocurrency when you buy a futures contract. Instead, you own a contract where you have agreed to buy or sell a specific cryptocurrency at a later date. Additionally, traders will use leverage to amplify their positions which can maximize profits.

We can also divide traders according to the time frame in which they operate. Scalpers are a group of people who generally rely on short timeframes of no more than four hours to enter and exit a position. They use technical analysis and sometimes economic news.

Investors choose a more passive method where they rely on the fundamentals of projects and rarely on technical analysis. They are in the market for a long duration exceeding a year.

Connecting the technical analysis part with the seasonality of the markets, we have a “Bear market”. But how do you profit when prices drop?

A “bear market” is a prolonged and often volatile period of decline in the price of almost any asset. The general definition of a bull market in traditional financial markets is when asset prices fall 20% or more from recent highs amid negative sentiment about the price outlook. On the other hand, a “bear market” in crypto, popularly known as “crypto winter”, is a similar drop in the price of crypto market assets that often causes the bankruptcy of certain market projects as they try to collect funds and meet the expectations of users and investors.

A cryptocurrency bear market begins with an imbalance between supply and demand that sees most market participants on the sell side. Fear and uncertainty begin to creep into frothy market conditions and sales begin to outweigh demand, resulting in sharp declines that are not quickly recovered. From a technical perspective, this translates into a series of lower highs and lows on a long-term chart, such as the weekly and daily chart.

Stablecoins lost confidence with the collapse of the Terra Luna ecosystem and the havoc it wreaked on the crypto market. It should be understood that only one type of these stable coins can really cause problems if there are some flaws in the construction of the ecosystem, these are the algorithmic stable coins. These assets have stock protocols where they offer tremendous returns, but the risk is very high with this type of investment. There are others such as “stablecoins” linked to commodities, such as gold for example, or those linked to currencies such as the euro or the dollar and which are used to reserve liquidity in crypto. and to carry out various transactions without having to go to a bank.

Has the Covid-19 pandemic been a brutal trauma for the cryptocurrency market?

The Covid-19 pandemic crisis caused major changes around the world and luckily we were able to escape them. However, the recovery was so swift it was devastating. The United States caused massive inflation through its 2021 stimulus package by printing more than 25% of historical US dollar reserves in less than eight months. Indeed, all currencies are collapsing against the dollar: the euro, the Australian dollar, the pound sterling, the yen, the Turkish lira, the Swiss franc.

It should be understood that bonds are securities that are issued by states but also by companies. In general, when we will issue bonds, we will promise a certain interest rate, a concrete example of which: the price of the bond is 100, we offer you an interest rate of 1%.

Today we are in a situation where interest is increasing by 5%. Can we expect a rate of 10% or 15%? It is not impossible. The person who bought a bond with 1% interest has suffered a reduction in its price, but will receive its face value. If you don’t hit the latter, you can recover it at the end of the period. Currently, bonds are collapsing because nobody wants them. This is an unprecedented situation because all assets are falling and there is only one asset that is rising, the dollar.

Currently, all central banks are targeting an interest rate hike. What will this bring?

This situation will result in a recession. Because when we have very high interest rates, it will slow down the economy and therefore companies will have to pay more. Companies that have a lot of debt are in trouble. Real estate around the world is problematic. An increase in interest rates will lead to a decrease in demand, falling prices, people unable to repay their loans, defaults and provisions on bank balances because there will be loans that will not be repaid.

Currently, we need peace. What we are going through is a delirious situation. It’s not just Russia and Ukraine that’s involved, it’s the whole world. We can expect a new paradigm especially with the alliance of China, Russia and India, on the one hand, and the great economic crisis in Europe. The most important thing for investors is that there are amazing things to do because downside is part of the financial markets.

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