Can Crypto Overcome Macro Headwinds? | Interview with Edward Zhao from Hex Trust
2024-10-30

In an exclusive interview with Cryptonews, Edward Zhao, Head of Markets at Hex Trust, provided an in-depth analysis of the crypto market’s current state, particularly in light of ongoing macroeconomic shifts in the United States affecting both Bitcoin and Ethereum prices.
Zhao explored the intricate connections between key economic indicators—such as Federal Reserve interest rate policies, unemployment rates, and inflation—and their impact on Bitcoin, Ethereum, and the broader cryptocurrency ecosystem. 
As one of the leading figures in digital asset markets, Zhao’s commentary offers a nuanced view of how macroeconomic forces, regulatory developments, and geopolitical risks shape the current and potential future landscape of cryptocurrency investing.
At a time when both the crypto and traditional financial markets are facing significant global challenges, Zhao specifically stressed institutional investors’ role in lending stability to the sector. 
He discussed how political dynamics in the U.S., particularly in the lead-up to the 2024 presidential election, further influence market sentiment. Zhao’s comprehensive insights provide a roadmap for navigating the current market environment. Let’s dive straight in:U.S. Macroeconomic Factors and Their Influence on the Crypto Market, Especially Bitcoin and Ethereum
The cryptocurrency market has become deeply intertwined with economic trends. According to Edward Zhao, the current macroeconomic environment in the U.S. significantly influences the price movement of Bitcoin and Ethereum. 
Zhao noted that one of the primary drivers is the Federal Reserve’s shift toward cutting interest rates, which has boosted risk assets across the board, including cryptocurrencies.
Zhao explained saying:
“Right now, the Federal Reserve’s interest rate cuts and lower unemployment rates have spurred capital movement into risk assets, pushing U.S. equity markets to an all-time high and encouraging more institutional investors to increase their exposure to cryptocurrencies,” 
He pointed out that with liquidity pouring into equity markets, cryptocurrencies are increasingly seen as an attractive alternative for institutional investors seeking higher returns in a low-interest-rate environment.
In addition to the favorable economic conditions, Zhao also mentioned the role of the upcoming in influencing market sentiment. 
He added:
“Crypto-friendly stances from political candidates as the U.S. elections approach are showing significant steps toward mainstream adoption, further contributing to investor optimism.” 
🗳️ Donald Trump leads Kamala Harris by 2% in the latest poll as both push their stances on cryptocurrency regulation in the final campaign stretch. — Cryptonews.com (@cryptonews) 
The growing political consensus around the need for clear cryptocurrency regulation has further bolstered confidence in the long-term viability of digital assets.
Zhao’s analysis also points to the growing interplay between political outcomes, macroeconomic policies, and digital asset markets, which is currently driving demand for Bitcoin and Ethereum. 
He believes that:
“This delicate interplay of political outcomes and macroeconomic factors is stimulating market growth and boosting investors’ confidence.” 
Because institutional capital flows into the market, cryptocurrencies have become more integrated with our financial ecosystem. The price of Bitcoin and Ethereum has responded accordingly, experiencing steady growth in recent months.Long-Term Crypto Bullish Outlook for Bitcoin and Ethereum
While short-term price movements can often dominate headlines, Zhao’s contrasting insight focuses heavily on the long-term factors that continue to support a bullish outlook for Bitcoin and Ethereum. 
According to Zhao, institutional adoption of digital assets is one of the most critical factors driving this long-term optimism, with the rise of exchange-traded funds (ETFs) playing a central role.
Zhao explained:
“The long-term bullish outlook for Bitcoin and Ethereum is underpinned by critical factors such as institutional adoption through ETFs providing easier access to crypto exposure, as seen by the consistent inflows into BTC ETFs.”
The approval of Bitcoin ETFs has opened the door for a broader range of institutional investors to gain exposure to the asset, and this institutional interest has provided stability to the market, even during periods of volatility.
📰 revealed that crypto products saw $2.2 billion in inflows last week. — Cryptonews.com (@cryptonews) 
Zhao also highlighted the growing importance of Ethereum staking, which has attracted increasing numbers of participants to lock up assets and engage with the network. 
“Staking is attracting more participants to lock up assets, which in turn strengthens the network and contributes to a more stable ecosystem,”
The rise of staking in Ethereum’s proof-of-stake (PoS) model has helped secure the network and reduce the overall circulating supply of ETH, which is now positively contributing to its long-term price support.
Moreover, Zhao pointed to the political landscape in the U.S., noting that both major presidential candidates have shown a willingness to provide regulatory clarity around cryptocurrencies. 
He said:
“We’re seeing crypto becoming an important bipartisan issue, with both presidential candidates looking to provide additional regulatory clarity around crypto, which should be positive for the space as a whole,” 
This regulatory clarity is expected to create a more favorable environment for institutional investors, which will further support the long-term bullish case for Bitcoin and Ethereum.Macroeconomic Environment and Geopolitical Risks: Opportunities and Challenges
While the long-term outlook remains positive, Zhao carefully acknowledged the challenges of the current macroeconomic environment and geopolitical risks. 
Lower interest rates, while beneficial for risk assets like Bitcoin and Ethereum, also create an environment where speculative investments can flourish, often leading to increased volatility.
“It presents both opportunities and challenges. On one hand, lower interest rates are driving liquidity into the market, encouraging investment in speculative assets such as Bitcoin and Ethereum.”
He further explained:
“On the other hand, inflation rates also play a crucial role in shaping investor behavior, with the current narrative suggesting that declining inflation rates may allow for quicker rate cuts, which could further benefit the crypto market by increasing overall liquidity.”
However, Zhao cautioned that geopolitical risks, such as the ongoing tensions in the Middle East, could introduce short-term volatility into the market. 
“Geopolitical risks, such as the recent tensions in the Middle East, can introduce volatility, with investors traditionally seeking ‘safer and more reliable’ assets like gold or cash options.”
Nevertheless, he pointed out that cryptocurrencies are increasingly being viewed as a viable hedge against geopolitical uncertainty. 
Zhao said, emphasizing that cryptocurrencies are resilient enough to weather geopolitical shocks.
“Institutional investors are gradually diversifying into digital assets as part of their broader strategy.”
Zhao’s commentary on this aspect suggests that while the macroeconomic environment presents challenges, the long-term fundamentals for Bitcoin, Ethereum, and the broader cryptocurrency market remain intact. 
“The resilience of cryptocurrencies positions them to continue on a positive trajectory, even in the face of such challenges.” Potential Downside Risks and the Role of Institutional Adoption
Despite the positive outlook, Zhao acknowledged potential downside risks that could derail the current bullish trend in the cryptocurrency market. 
Zhao warned:
“Ongoing conflicts on the world stage and rising tensions between major powers can create uncertainty and temporarily shake market confidence.”
Additionally, regulatory uncertainty remains a key risk as governments worldwide continue to develop new frameworks for managing the exchange of cryptocurrencies. 
“The crypto market is heavily influenced by sentiment and narratives, and any sudden changes or restrictive policies could restrict institutional participation.” 
This sentiment-driven market dynamic can lead to rapid price shifts, particularly if regulatory frameworks become more restrictive or if geopolitical tensions escalate.
However, Zhao expressed confidence in the resilience of the cryptocurrency market. 
He particularly emphasized that:
“The underlying fundamentals for Bitcoin, Ethereum, and the broader cryptocurrency market remain strong. We’ve seen growing institutional adoption, increasing regulatory clarity in key markets, and the maturation of the crypto ecosystem. As more infrastructure is built, crypto will have the resilience to recover from short-term disruptions and continue their growth despite challenges.”
Zhao noted that one key driver of this resilience is the increasing institutional adoption of cryptocurrencies, which has contributed to a more stable and mature market environment. 
“The entry of institutional investors has lent legitimacy to the cryptocurrency market.”
He explained that the influx of institutional capital has improved liquidity, spurred the creation of new financial products, such as ETFs linked to cryptocurrencies, and set the foundation for long-term growth.
While institutional investors can sometimes react sharply to macroeconomic and geopolitical shifts, Zhao believes their overall involvement is a net positive for the market. 
“Institutions may be more reactive to macroeconomic and geopolitical shifts, but their involvement also brings greater liquidity and more sophisticated risk management strategies.” 
In the long term, he believes institutional participation will continue to support a more structured, stable, and sustainable cryptocurrency market.
Zhao’s insights suggest that while short-term volatility is inevitable, the long-term outlook for Bitcoin, Ethereum, and the broader digital asset ecosystem remains strong. 
With increasing institutional involvement and growing regulatory clarity, the cryptocurrency market is set to become an even more integral part of the global financial system.About Edward Zhao (Head of Markets at Hex Trust) 
Edward spearheads the Markets division at Hex Trust, driving strategic solutions tailored to clients navigating the volatile world of digital assets. Edward was exposed to crypto early on, beginning Bitcoin mining in 2011. His extensive experience in trading and crypto has equipped him with a deep understanding of crypto markets.
Before joining Hex Trust, Edward amassed over a decade of experience at leading investment banks, including Credit Suisse and Bank of America. His extensive prime brokerage and trading background laid the groundwork for his subsequent focus on crypto trading. Meeting Hex Trust CEO Alessio Quaglini at industry events marked the beginning of his journey with Hex Trust, where Edward has been driving new trading platform initiatives. These initiatives are designed to adeptly handle the complexities of crypto trading and the rapidly evolving digital asset landscape for Hex Trust clients.
About Hex Trust
Hex Trust is a licensed and insured digital asset custodian. Led by veteran banking technologists and award-winning financial services experts, Hex Trust has built Hex Safe. This proprietary bank-grade platform delivers solutions for digital asset protocols, foundations, financial institutions, and the Web3 ecosystem.