Recovering Digital Assets | What Needs To Be Done?

The crypto market is currently in a holding pattern between the likelihood of a deeper crash and a shaky recovery. But before crypto markets get back on track and regain trust, it might take months and a few significant realisations.

Over the years, there have been numerous market crashes, including those in the securities and bond market, dot-com stock market, real estate banking, and property values, as well as the current cryptocurrency market.

Finally, there were always a few main characters who advanced the plot, such as Michael Milken and Sam Bankman-Fried, the current CEO of FTX. Although everyone still wants to make a profit, all of these markets have since recovered, and they all did so with the help of more robust regulation. The irrational fever of becoming wealthy has since given way to a more calculated and thoughtful pursuit of long-term wealth.

The crypto market is entering this stage as a result of the most dramatic bull market, which occurred over the past two years, followed by high-profile meltdowns after many ups and downs. Before investors regain confidence in using cryptocurrency as an investment tool or for other purposes, a few issues must be resolved.

The effects of the FTX exchange's collapse in November were not limited to that one instance. It took place in a cryptocurrency market that was already in disarray following the collapse of Celsius, Three Arrows Capital, and Voyager Capital.

The unidentified funds that FTX once held are one of the main threats to the market. Even with thorough analysis, it is only possible to get a partial picture of which funds FTX still has control over. Whether ETH, BTC, or other assets would be sold on the open market is also impossible to predict. Although it is too soon to determine the full impact, there are some indications that even FTX's assets may eventually be absorbed by the market.

The majority of stablecoins must maintain their peg to the US dollar with little fluctuation in order to restore trust in the cryptocurrency markets. We are seeing attempts to trade other assets for this cash-backed token, but for now, USDC is a more dependable stablecoin.

However, USDT continues to terrify the markets as it floats at $0.9997, just below the dollar peg. There is no foolproof method to dispel the worries surrounding USDT. One possibility is that more money will be kept in USDC coins, which are a popular tool for retail investors.

Custodial wallets' importance needs to be reaffirmed. Even well-known services can no longer be taken for granted as safe after the dramatic losses of coins kept in custody. It is necessary to re-teach a new generation of cryptocurrency users and traders on how to rely on wallets.

Some cryptocurrency projects called for sizable inventories of locked-up coins and tokens. Although they provided liquidity, those projects also carried a risk of hacking, breaches, or mistakes. Better smart contracts may be able to address some of these problems, but all cryptocurrency owners must be able to predict which coins they can control and which are vulnerable to theft or loss by third parties.

Ultimately, it may take a return to Bitcoin to calm down the markets and offer a more

solid asset. A return to owning Bitcoin would simplify the asset class for most

users. Some of the wrapped or locked BTC may have to be flushed out and lose

value before a new standard of crypto value emerges.

It is partially true that cryptocurrencies are attractive only for their ability to pump. There are plenty of users setting up wallets for utility, such as spending, faster international transfers, remittances, and even paychecks. That convenience will not be abandoned easily.

Some form of regulation may be established to protect users. This may come from the industry or from outside sources. As more experts are aware of the reporting potential of crypto, it would be possible to be transparent about real reserves and liquidity practices. The cryptocurrency market and all its participants must have the motivation to regulate the right way if they want confidence and investment to return for a new run and drive the next bull

market.

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