Crypto investors should exercise caution in the market, as it faces various challenges and risks, according to Hal Press, the founder of North Rock Digital. While Press does not foresee a significant decline in the crypto market, he believes that investors should take a measured approach to their investments.
One of the challenges that Press identified is the high number of short positions in the market. This could lead to a short squeeze, where traders who had bet against a cryptocurrency are forced to quickly buy it to cover their positions and minimize losses, leading to a cycle that can “squeeze” short sellers.
Press also expressed concern about the broader global landscape, where many countries are adopting more stringent regulations on cryptocurrencies. He noted that the leaders of G7 nations, including the US, Canada, and Germany, are planning to establish global regulatory standards for crypto.
The North Rock Digital founder emphasized that potential regulatory actions could force investors to reconsider their positions. He believes that the market’s resilience can be attributed to inelastic demand, but there is little new money entering the space, posing a challenge for the market to maintain its current levels long-term.
Press acknowledged that he could be wrong, and the market could continue to trend upward. However, he considers the risks outlined above to be worth taking into account for a more measured approach to the cryptocurrency market.
Investors in the market should also take into account the upcoming Shanghai or Shapella upgrade for Ethereum, scheduled for April 12. The hard fork will unlock over 16 million ETH into circulation, which makes up 14% of the current supply. While Press noted that Ethereum is the fund’s largest position, his cautionary stance is not primarily due to the upgrade.
While the crypto market has seen significant growth in recent months, investors should exercise caution and consider the various challenges and risks it faces. With potential regulatory actions and low liquidity levels, it is essential to take a measured approach to investments in the market.