This year’s Super Bowl was more than an American football game. It became a chapter in financial history as the cryptocurrency industry sprayed millions of dollars onto star-studded TV commercials playing on the fear of missing out on the next big thing in investing.
“Fortune favors the brave,” said an advertisement for Crypto.com, a Singapore-based stock exchange that featured basketball player LeBron James, who advised a computer-generated version of himself as a teenager that “if you want to write history, call your own shots ”.
Two months later, discretion is proving to be the best part of bravery in the markets for bitcoin and other leading cryptocurrencies. Trading has slowed in the weeks following the Super Bowl commercial, as fundamental factors – ranging from rising interest rates to the war in Ukraine – have dampened investors’ animal spirits.
“We did not see a massive influx of retail investors into crypto after the Super Bowl ads,” said Noelle Acheson, head of market insight at Genesis Trading, a New York-based digital asset broker that claims to have handled $ 116.5 billion. trades last year. “Quantities are low due to a huge amount of uncertainty in the markets.”
Measuring cryptocurrency activity accurately is difficult due to the large number of trading venues around the world that are subject to little or no regulatory oversight and produce data with uncertain reliability. Analysts like Acheson base their observations on trading figures reported by larger, better-known exchanges that are considered more credible.
Such measures point to a clear decline in trading activity in recent months. The Block Legitimate Index shows e.g. spot crypto volume has remained below $ 1 billion every month this year after topping that figure in nine of the 12 months of 2021. In the March month after the Super Bowl, the index showed $ 739 billion. activity compared to $ 2.2 billion in May last year.
Prices have fallen along with trading volume. Bitcoin fell from nearly $ 69,000 in November to just over $ 33,000 in January. Since then, it has jumped around between about $ 36,000 and $ 47,000 on most days.
For crypto cognoscenti, recent market action suggests that major investors, rather than retail players, are taking the lead. Digital assets are increasingly being used to spice up portfolios of larger players, they say, and occupy a place alongside other “risk assets”. When these investors become cautious, they trim their cryptocurrencies and take advantage of the 24-hour digital asset trading to make their exits.
“Because bitcoin has been seen by many of the big macro investors as a risk asset – it’s high volatility, a function not a mistake – then it’s treated as a risk asset,” Acheson said. “When these large funds need to eliminate the risk, bitcoin is a very liquid asset with high volatility that is traded 24/7/365, so it is relatively easy to relieve.”
Chris Zuehlke, a partner at DRW, a Chicago-based trading firm and global head of the company’s cryptocurrency arm, Cumberland, said he sees two investor groups fighting for it in the crypto market this year. One sells in turbulent times, as it would with other investments in promising technologies. The other buys dip, having the attitude of the original promoters of cryptocurrencies that they could serve as protection against the whims of fiat currencies and the governments that oversee them.
“Some fraction of the world sees it as a risk asset and trades it in the same way as some of the high-growth technology stocks,” he said. “Another part of the world sees it as a hedging asset or a hedging asset, a store of value. That push and that pull between the two camps, I think, is what defined the range we’ve been sitting in the last few months.”
Another manifestation of the increasingly important role that large investors play in the crypto market is the growth of complex derivatives trading strategies. In March, Cumberland announced that it was trading tailor-made over-the-counter options “in a range of coins”. Zuehlke said that “while vanilla options are interesting to people, they move very quickly into more complex structures.”
It’s an exciting fate for a pop cultural phenomenon. Although cryptocurrencies are becoming part of Super Bowl commercials – like cars, beer or Hollywood blockbusters – trading these digital assets is becoming harder for the average person to understand.
Further reporting by Adam Samson and Joshua Oliver in London