Crypto Drawdown Not a Repeat of 2022, Experts Warn

The current crypto drawdown bears some resemblance to the one in 2022, but drawing too much from that experience may be misguided. According to Fabian Dori, Group Chief Investment Officer at Sygnum, superficial familiarity with past market events can lead to misreading the situation.

Dori notes that the current downturn is primarily driven by liquidity and sentiment factors, rather than a deterioration in fundamentals. This means that even though prices are falling, the underlying value of established digital assets remains intact.

In contrast, the 2022 drawdown was triggered by a fundamental collapse, with leverage, opaque credit, and outright fraud contributing to a loss of trust and a sharp decline in prices. Dori emphasizes that the current situation is different, pointing to rising adoption across various use cases, including Bitcoin as an alternative store-of-value, stablecoins, smart contract platforms, and tokenization.

Regulated institutions are also building on-chain infrastructure, rather than retreating from it, and flows into regulated products and on-chain accumulation have shown signs of stabilization after a period of growth. These indicators suggest that the fundamentals thesis holds for established use cases, at least in the short term.