Crypto industry is ‘maturing’ but expect slowed growth in second half – KPMG
The global financial firm highlighted how Bitcoin's performance and risks now correlate with traditional assets, says market conditions would keep testing the industry.
The crypto market is maturing, but investments in the space are expected to keep declining in 2022, according to leading financial company KPMG report.
According to the report, global investments into crypto during the first six months of 2022 stood at $14.2 billion from 725 deals. In comparison, $32.1 billion was invested in the industry during the same period in 2021.
KPMG said the record market crash the industry experienced “due to the unexpected Russia-Ukraine conflict, rising inflation, and the challenges experienced by the Terra crypto ecosystem” showed the growth of the space and how its solutions keep attracting investments.
However, the crypto space could experience a quieter second half because of the changing nature of investors.
“Prior to 2018, most crypto investments came from retail consumers. Since then, the investor profile has changed, with institutional and corporate investors accounting for a much larger share of investment.”
The global financial firm also highlighted how crypto’s performance and risks now correlate with traditional assets. According to KPMG, the current market conditions would test crypto assets, especially Bitcoin (BTC).
Bitcoin’s recent price performance has correlated with that of other traditional assets. A recent IMF report revealed that the “correlation between Asia’s equity markets and crypto assets such as Bitcoin and Ethereum (ETH) has increased.”
For more context, the flagship digital asset has shed 5.9% of its value within the last 24 hours, while Nasdaq, S&P 500, and Dow are equally down during this period –although at a much lower rate.
Bearing this in mind, KPMG predicted a slowdown in crypto investments, “particularly (from) retail firms offering coins, tokens, and NFTs.” However, crypto and blockchain infrastructure investments might survive the downturn as more focus is placed on “using blockchain in financial market modernization.”
KPMG France director of blockchain and crypto assets, Alexandre Stachtchenko, said he expects some crypto to die out, especially firms that “don’t have clear and strong value propositions.” In the long run, this would be good for the ecosystem as “it will clear away some of the mess created in the euphoria of a bull market. The best companies will be the ones that survive.”
The KPMG report also shared the same view. The firm wrote that “well-managed crypto companies with healthy risk management policies, long-term vision, and strong cost and risk management approach” would survive the second half.