Uncertainty is roiling the cryptocurrency market, and crypto firms across the industry are in flux. Digital currencies like bitcoin made a market comeback last week, but fears of a “crypto winter” have persisted. Bitcoin, the world’s most popular cryptocurrency, has shed more than half its value this year.

Overall, from late 2021, the market values for digital assets like cryptocurrencies and non-fungible tokens have tumbled. Some large lenders like Celsius Network and Three Arrows Capital have filed for bankruptcy protection amid claims of poor risk management, while some of the biggest players, like Coinbase, are laying off staff.

Despite turmoil in the market and falling values, some are optimistic about for crypto’s future. William Cai, co-founder and managing partner of the financial services company Wilshire Phoenix, which was founded in 2018, said that the latest crash doesn’t necessarily point to crypto’s downfall.

“The biggest insight that we have is that this time it is different than the prior so-called crypto winters,” Cai told “Marketplace Morning Report” host David Brancaccio. “I think one thing that crypto investors and all investors should look at is the crypto market has been taking a lot of signals from overall markets, economic conditions and stocks.”

The following is an edited transcript of their conversation.

David Brancaccio: Things go up, things go down. But what’s happened — what is happening — to cryptocurrencies over the last eight months, would you say it’s cracked the foundations?

William Cai: No, definitely not. It’s, been interesting. The biggest insight that we have is that this time it is different than the prior so-called crypto winters. I think one thing that crypto investors and all investors should look at is the crypto market has been taking a lot of signals from overall markets, economic conditions and stocks.

Brancaccio: So the general economy. Look, the concern about inflation, central bank’s raising interest rates, money coming out of the stock market, you think that crypto in part is caught up in those currents?

Cai: Yeah, absolutely. If you look at the past six months, or even shorter, the price correlation between crypto markets and S&P 500, [or even] better, NASDAQ, has been super high. I think if you anonymize the data, take out the ticker or bitcoin or any of the tech stocks, if you just combine the time series, it’d be hard to tell whether, if you can pick out whether it’s one is bitcoin or versus some of the tech stocks. So what’s interesting about this is, even if let’s say we’re in the crypto winter, we won’t get out of the crypto winter, unless the overall economic activities improve or the equity market starts to improve. It’s really taking signals from the general market, rather than—and we’ve had some pretty major events, bankruptcies and events within the crypto space, but it really hasn’t, to what you were saying, [been] shaping the foundation. It’s been showing a lot of resiliency. And I think it’s waiting for the overall market to improve.

Brancaccio: Ah, the power of metaphor, you refer to it as the “crypto winter”, implying there will be a “crypto spring” and so I take your point perhaps that it’s not crypto Armageddon, that’s not what I’m hearing.

Cai: Absolutely not. Absolutely not. I think similar to the past so-called crypto winters, the underlying foundation, the development, the technology and the adoption [of crypto] has been continuing. And yeah, I think we here at Wilshire are very optimistic about the future of crypto.

Brancaccio: But it must be unsettling. When you see firms like Celsius, that lender in crypto, is now in bankruptcy protection or a stablecoin is shown not to be stable.

Cai: Absolutely. [For] every one of those events, our view is, “Is this significant? Yes. But at the same time, they’re not.” And let me explain what we, what we think. It’s new technology. And new technologies sometimes fail, but better and newer technology will come and replace it. I actually want to mention, because you mentioned Celsius, we think that this is not so much what’s wrong with the crypto space, per se. This is a bit of a repeat of all, I would say, new asset classes and speculation. This comes from, you know, greed and a bit of a lack of risk management. So this is a bit of a kind of shaking out of the ones that’s over-levered. That’s overextended. And I think this is a good thing overall for the crypto space so that we get to a better foundation.

Brancaccio: Certainly some of this was a mania, right? Yet bitcoin, last November running at $65,000 each, it’s now down, you know, when we’re talking in the low $20,000s. You know, is it like a tulip in the 18th century? I mean, tulips are still useful, you can put them in your garden, but they’re not much of an investment, or is it a different kind of mania, do you think?

Cai: A couple of thoughts come to mind. So bitcoin itself, I would be concerned if the entire crypto space is just bitcoin, right? But bitcoin has, one, it has proven its resiliency and technology, but also built the foundation of blockchain technology and that really has expanded so you have these ecosystem blockchains like Ethereum or Solana and people building decentralized finance apps and products on top of it. And that really is where we think the very exciting growth of the crypto field is going to. As to your kind of example of crashes or asset bubbles right I think maybe an interesting example that could be comparable to some way to the tulips is NFTs.

Brancaccio: Yeah, non-fungible tokens, a way of verifying the authenticity of you know, for instance, a work of art you can use this digital device essentially.

Cai: I think the NFT certainly has gone for quite a craze in the past several months and now just along with the other assets, in terms of pricing, it has definitely reduced in terms of prices and interest. But yeah, at the same time I think even in the NFT, is that non-fungible tokens, its representation of art, it’s not entirely worthless to me. It does bring people pleasure. And it’s like art, it is art, and to me that there is value in such instruments, especially on blockchain terms of decentralized ownership and fractional ownership. It’s good that it’s also having a consolidation and deflating of the bubble. But I think it is NFTs, just like other assets, it is here to stay.

Brancaccio: You know, I’m hearing from you that crypto could still play a role in a portfolio held by a sophisticated investor, institutional investor. But you know, you must have this happen to you, it happens to me, I mean, nieces and nephews are saying, you know, should I put everything into crypto? And you know, it’s one thing if a person worth $100 million puts in 2% into crypto, knock yourself out, but when a newbie puts in five or 10 grand, and that’s half of everything they own. I mean, that’s a different story.

Cai: No, you’re absolutely right. There is risk in crypto investments, but I think you kind of alluded to it, it is about understanding risk, and more importantly about sizing, kind of how does crypto or any risky investment, how does it fit into your portfolio, that you’re comfortable with the risk? It definitely shouldn’t be, I think for 99% of investors, shouldn’t be 50% or higher percentage of your overall investment portfolio. And I think what should help and I think one thing as we’re working with the regulators is a strong and protective regulatory framework that encompasses crypto assets that will help kind of educate investors and offer a level of protection in terms of for example, like investor education and what really they are putting into their investment portfolio.