A year from top to bottom of cryptocurrency
More than a year ago, pundits and investors called Bitcoin the future of money and Ethereum the world’s most important development tool. NFT is on the rise and Coinbase trading is breaking records.
Twelve months later, the world’s two largest cryptocurrencies have lost three quarters of their value. An industry that was once worth $3 trillion is now worth about $900 billion. Rather than being viewed as an antidote to inflation, Bitcoin is becoming a speculative asset, expanding at peak times and falling when investors panic.
In just a few days, the world’s third-largest cryptocurrency exchange, FTX, one of the largest empires in the $32 billion cryptocurrency market, collapsed and nearly went bankrupt, said FTX founder Sam Bankman. Fried, from the second richest in the world. The cryptocurrency billionaire got nothing, admitted he made many mistakes and resigned as CEO.
“Looking back, the excitement and value of the asset has definitely increased compared to its true worth. The collapse was so rapid that many people declared the demise of digital assets,” said Cathy Talati, research director at investment firm Arca.
No one can say for sure if the crypto sector will rebound, but a year-long decline has exposed weakness in the sector and reminded investors why there should be financial regulatory rules. The past few months have seen a string of bankruptcies, from Terra/Luna, Voyager Digital to FTX, leaving crypto holders inaccessible to their accounts and unable to recover their investments.
“We seem to be in a confusing relationship with cryptocurrencies and want to get out of there. It’s time for the industry to mature and accept regulations. The future of the industry lies in listing and selling assets on the internet. a regulated exchange where everyone is protected,” said Michael Saylor, president of MicroStrategy, a tech company that owns 130,000 bitcoins.
Bitcoin fell to a two-year low of $15.7K Ethereum and Solana faced a similar situation, while cryptocurrency-related assets also fell in value. Exchange Coinbase last week announced a 50% drop in revenue for the third quarter of 2022 compared to the same period last year, resulting in a loss of $545 million. In June they had to lay off 18% of their employees.
The decline in cryptocurrencies started in late 2021 as inflation increased and people started looking for safer assets. The sell-off has been ongoing since January, causing Bitcoin to lose 17% of its value and Ethereum to lose 26% of its value. David Marcus, former Head of Crypto at Meta, commented on Jan. 24, “During the crypto winter, the best entrepreneurs build the best companies. It’s time to focus on problem solving. in fact, instead of pumping tokens.
However, the crypto winter is not imminent, the market is even stabilizing again. The shock didn’t come until May, when UST and Luna lost value and users panicked. When Luna crashed, more than $40 billion in assets were destroyed, many people lost confidence in cryptocurrencies.
Bitcoin lost less than half of its value six months earlier as a result of Luna’s collapse. The Celsius platform has suspended payouts due to “extreme market conditions”. Binance made the same decision and BlockFi reduced its workforce by 20%. Bitcoin had a bad month as it lost 38% of its value while Ethereum was also down more than 40%.
A series of bankruptcies followed.
3AC, one of the world’s largest cryptocurrency investment funds that once had under $10 billion in assets under management, filed for bankruptcy in Manhattan federal court on July 1, alleging that it had not paid its debts due to bankruptcy, money in Luna and UST could pay. This move directly impacted the market and led to a further expansion of the cryptocurrency crisis. After 3AC, it’s the turn of cryptocurrency brokers Voyager Digital and Celsius.
Back then, Sam Bankman-Fried was considered the savior of the cryptocurrency industry when he decided to spend billions of dollars to bail out a bankrupt company. However, the fall in FTX also started here as all trading via subsidiary Alameda Research was unprofitable.
Acknowledging the volatility and “necessary risk management measures,” Binance CEO Changpeng Zhao confirmed the liquidation of all FTX tokens on Jan. 7. This triggered a massive sell-off, causing the token price to surge from $22 to $3 overnight.
After Bankman-Freed filed for bankruptcy on the night of November 11th, he went from savior to criminal and faces imprisonment. Ryan Gilbert, founder of venture capital firm Launchpad Capital, believes the crypto world is facing a major crisis of confidence following the FTX shock. In a market with no central bank and no collateral, trust is the most important factor.
“The question is whether there will be confidence in cryptocurrencies at this stage. The concept of trust is collapsing like the collapse of a number of crypto companies over time,” he said.
Diep Anh (Track CNBC)