Crypto Exchange BitMEX's Acting CEO: We Have Gone Through the ‘Valley of Death’

Crypto exchange BitMEX was built to weather the current market turmoil caused, in part, by the failure of three U.S. crypto-friendly banks within a week, said Stephan Lutz, acting CEO and group chief financial officer.

"The current market situation is actually what BitMEX originally was built for by our founders," he told CoinDesk TV's "First Mover" on Tuesday.

"Since the end of last year, we think we have been through the valley of death," he added. "We see positive signs in the market and we are able to reap those benefits. We are very grateful that the ecosystem and the community trusts us as a real crypto exchange that is focused on crypto."

Lutz said that if a crypto exchange is focused on derivatives, is safe, segregates client assets and has limited to no connection to the fiat world, it is likely thriving. BitMEX, which outlines its 2023 predictions in a new report, is seeing a rise in its volumes and market share.

Three scenarios

In the report the exchange details three scenarios it sees playing out this year for the crypto industry. In the first, risk appetite for quality crypto assets recovers as the pace of Federal Reserve interest rate hikes slows.

In that scenario, Lutz said, “we go back to quantitative easing [and] more money supply which drives inflation” and, in turn, “drives crypto prices to the extent that you use your crypto, bitcoin in particular, as an inflation hedge.” He said that’s what has occurred over the past two weeks.

In the second scenario investors remain cautious. According to Lutz, that means people are waiting “before going back significantly into crypto.” If they do invest, the report advises looking for projects with legitimate use cases.

The third scenario depends on whether regulators are embracing crypto and the “likelihood that some jurisdictions will figure out how they deal with crypto regulation and therefore provide certainty for investors [on] how to deal with it,” Lutz said. That would then lead to increased transparency and trust in crypto players, he said.

The proposed nakaDollar

Earlier this month, BitMEX co-founder Arthur Hayes proposed a stablecoin called the nakaDollar (NUSD).

Hayes said the bitcoin and bitcoin derivatives-backed token would be considered extremely liquid and appealing to traders. It would rely on member crypto firms to maintain a peg to the U.S. dollar.

Lutz said the token would be a “stable unit of account that is bound to the U.S. dollar in terms of exposure, but without the risks of the current stablecoin system.”

Hayes’ nakaDollar idea is a “natural one, if you think about it,” Lutz said.

"We believe if it's followed – and there will be people who will take up the idea because it needs to be a decentralized idea in a way to make it to make it credible – that [nakaDollar] will really be or can be a game changer in the whole crypto industry."

Read more: Arthur Hayes Proposes Bitcoin-Backed Stablecoin Called NakaDollar