With the total crypto market cap falling by $1 trillion on a year-to-date basis, panic is on the rise but co-founder and CEO of MidChains Basil Al Askari assures investors that all markets go through cycles and that “crypto is here to stay.”
In an exclusive interview with Arabian Business, Al Askari warned investors against taking any “drastic decision” and instead to use this period to make smart investments such as dollar cost averaging their portfolio.
Al Askari also discussed the role of regulatory bodies in digital currencies and commented on the growing trend of financing a variety of expenses, from real estate to even meals, with crypto.
Is this the end of cryptocurrency or just your regular market volatility? In other words, should people panic?
Markets have always gone through cycles throughout history and this is not different, it’s just been some time since the last one.
The recent crypto price action is part of a larger macroeconomic market correction across multiple asset classes including equities with the exception of a few outliers like Terra (under investigation by authorities internationally).
It’s important to remember not all cryptocurrencies should be treated equally as they have very different levels of maturity and economic profiles.
Investors should always do their due diligence before deploying capital in both the assets they are seeking to invest in and the service providers they decide to use.
Although crypto historically was less correlated to the wider markets, as more institutional capital enters the arena the more correlated the asset class will tend to lean.
Globally we are facing the first potential recessionary cycle in a decade due to many factors including rising interest rates and inflation across major fiat currencies.
People should never panic, but rather view this part of the cycle as a time to make smart investments like dollar cost averaging their portfolio at a risk level they are comfortable with.
Bitcoin continues to remain the dominant cryptocurrency and many economists view this asset specifically as having the future potential to become a digital standard for benchmarking value, much as gold was before the implementation of unbacked (Fiat) currencies.
We can also draw some parallels to the early days of .com tech stocks which had to go through many cycles before some emerged as the most highly valued companies on the planet. It’s still very early days for crypto and although it’s likely we will see more volatility in the short term (as with the rest of the market) the long-term outlook is still very positive.
When do you expect the market to regulate? And what is your outlook for the rest of 2022? How do the regulations set up in countries like the UAE or Saudi Arabia impact global investors?
Several markets already regulate crypto directly. In the UAE, ADGM (free zone) was the first and more recently VARA (DWTCA free zone) and DIFC (free zone) have begun to take a more active role in the space; SCA (onshore federal) will likely also release a framework this year.
More broadly, Bahrain, Gibraltar, El Salvador, Singapore, Malta, Switzerland, UK, Canada and others are actively regulating crypto service providers and issuers.
Crypto is here to stay, the best thing for the overall health of the market and to protect investors is for balanced and thoughtful regulations to be put in place internationally since for the first time we are looking at a truly borderless asset class.
Given recent events (i.e. Terra) regulators may prioritise the development of regulation for crypto more globally (i.e. US and Saudi Arabia).
Crypto has proven to be a highly demanded and resilient asset class, the best thing for the overall health of the market and to protect investors is for balanced and thoughtful regulations to be put in place internationally since for the first time we are looking at a truly borderless asset class.
Though this might take several years to develop, regulation will be focused on areas such as KYC and AML, market abuse, and legal protections for investors for certain risks.
How does the ability to increasingly use cryptocurrencies to finance real estate investments or pay for meals etc. impact the concern people have over market fluctuations?
At this stage these use cases are not material enough to impact the overall market relative to investments and trading activities.
Over time many believe usage of crypto for payments and cross asset investments will increase overall market adoption of the asset class and should eventually have a positive impact at scale.
What is the recommended time investors should wait before making any major decisions? Is there a solution besides this for concerned investors?
Investors should never make drastic decisions. It is important for investors to always remain disciplined and use the wide variety of resources available to analyse and make rational decisions based on their own risk appetite.
No investment is without risk, but also indecision carries its own opportunity cost.
When making investment decisions there are a few basic principles investors should always follow: Measure your comfortable risk level and time horison, do your due diligence, maintain a diversified portfolio to hedge your risks and remember – it’s not gambling.
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