A rise in crypto demand is driven by waning trust in traditional financial systems – Taras Dovgal, VP of Products at Münzen

With the first quarter of 2023 behind us, it’s essential to reflect on what happened in the crypto market so we can predict what’s next. The following is an interview with Taras Dovgal, the Vice President of Products at Münzen and a veteran crypto entrepreneur and developer.

Taras shared his thoughts on the current state of the crypto market and his expectations going forward. According to him, crypto is poised for a new wave of growth, with new users, projects, and players entering the market every day, intensifying competition and maturing the market.

According to Taras, the crypto industry had a huge first quarter in 2023. He said the crypto market showed remarkable resilience despite the storm raging in traditional markets.

With a 72% gain, Bitcoin was the strongest-performing asset in the first quarter of 2023. It topped the tech-heavy Nasdaq Composite index, up nearly 16%, and the S&P 500 index, which gained 7%.

“One of the things that really stands out about crypto currently is its stability despite the tumult in other industries – that gives us hope and evidence that it’s here to stay,” he said.

In addition, Taras explained that Bitcoin, after being weakly correlated with gold for a long time, is now strongly correlated with the precious metal.

“While Bitcoin and Gold did not show much strong positive correlation even during the 2021 bull run, at the time we’re talking, its 30-day rolling correlation with gold stands at 57%, the highest level in almost 2 years. That means Bitcoin is increasingly being viewed as a safe-haven investment, like gold, which has served this purpose for centuries,” he explained.

Bank failures have made people question the status quo

According to Taras, the increased macroeconomic uncertainty and major US bank failures have led investors to look for more resilient alternatives outside the traditional financial system.

In March, Silicon Valley Bank and Signature Bank collapsed, setting off a panic in the financial markets. The Federal Reserve lent US banks nearly $12 billion under a one-year lending program. Additionally, US authorities acted to protect depositors as they recognized that there was a “serious risk of contagion” that would lead to bank runs. The US government introduced a relief package for banks and financial institutions, including loan guarantees and liquidity provisions. The government also took steps to increase transparency and strengthen consumer protection laws.

Taras, however, said this did not prevent people from realizing the flaws in the traditional financial system, leading to a rise in cryptocurrency interest and demand.

“It was like a spark that started a fire. Cryptocurrencies surged in demand, signalling people are ready to embrace digital assets and challenge the established financial paradigm,” Taras said.

BTC and ETH are preferred over stablecoins

Despite Bitcoin’s robustness, the market cap of the top 15 stablecoins fell by $6.2 billion in the first quarter. A possible explanation for this drop is Paxos’s shutdown of Binance USD and USD Coin’s abrupt depeg during Silicon Valley Bank’s collapse. Moreover, the lack of transparency of Tether’s USDT contributed to the overall distrust of stablecoins.

In light of the unquestionable gains of BTC and ETH, their long-term presence on the market, and Ethereum’s Shapella upgrade, which enabled ETH staking reward withdrawals and contributed significantly to the increase in capital flows into liquid staking pools, Taras believes it is fairly clear why people choose these crypto alternatives in place of traditional financial services.

“When something as stable as a bank fails, people want at least a bit of ground to stand on. This is why people have turned to established cryptocurrencies, such as Bitcoin and Ethereum, which have staying power,” he said. 

Finally, Taras stated that the adoption of cryptocurrencies is growing exponentially. He said that crypto ownership is at an average of 4.2% globally, with over 420 million crypto users as of 2023, citing Triple A data.

“More and more people are looking towards cryptocurrencies because of the security, speed, and convenience they provide,” Taras explained.

“The growing interest in digital assets is a sign of increased trust in their potential and the growing acceptance of their role as an asset class,” Taras said. “But if you ask me, crypto’s mainstream success will come when people begin using it to buy their groceries,” he concluded. 

Disclaimer: This interview does not offer investment advice. It is only intended for informational and educational purposes. It is your sole responsibility to make your own investment decisions based on the information provided here.