“Grab your conviction and stick with it.” That advice, shared Tuesday by the hosts of the popular cryptocurrency podcast Bankless, Ryan Sean Adams and David Hoffman, sums up the mindset prevalent in crypto circles today.
Crypto is in a bad place. In the past seven days, the price of bitcoin is down more than 29 percent, while Ethereum is down 38 percent, and essentially all other cryptocurrencies followed suit. According to cryptocurrency data provider Coinmarketcap, the combined value of the cryptocurrency market has fallen by about 70 percent from its peak in November 2021, when the rise and rise of crypto and Web3 seemed irresistible. The Tether stablecoin, a cryptocurrency designed to maintain parity with the US dollar and reportedly backed by dollar reserves (although there are questions about the composition of those reserves), has lost its peg and is trading at 99 at the time of writing. cents per unit. Major crypto firms, starting with Exchange Coinbase, have announced major layoffs. The latest victim of the crypto crisis is Celsius, a lending platform that, according to insights firm Kaiko, has put $475 million of its clients’ money into stETH – a synthetic asset that is theoretically exchangeable for the leading cryptocurrency Ethereum at some point in the future. That follows the collapse of stablecoin terra-luna last month, which sent shockwaves through the industry. The S&P 500 index fell 3.5 percent on Monday and the Nasdaq crashed further by 4.2 percent.
If you’re one of the 16 percent of Americans who have bought cryptocurrency in recent years, now might seem like the right time to panic. But among heavyweights in the crypto space, the general reaction to this decline has ranged from zen to blasé. A meme posted on the Twitter handle of Bankless shows a noose-wearing James Franco on the gallows – a stand-in for crypterati that endured the crypto crash of 2018 – asking two crying 2022 crypto holders if it is their “first time” there. A less charitable meme shared by Twitter, crypto skeptics compare confident crypto investors to a serene dog drinking coffee in a burning hut. “This is fine,” says the dog, as flames threaten to engulf him. This too will pass.
“If you look at the fundamentals – blockchain adoption, user expansion, real use cases being unearthed, you wouldn’t think the industry is going down anywhere,” said His Excellency Justin Sun, Grenada’s Ambassador to the World Trade Organization, and creator of the TRON blockchain, whose stablecoin USD also lost its peg to the dollar last week. “The market is full of FUD [fear uncertainty and doubt] right now, the crash of [terra-luna] and the more recent insolvency issues of some DeFi platforms and funds out there aren’t helping either, but I believe in rational expectations and the market is correcting itself. There have always been cycles and we are on the slippery path of the current one.”
Paolo Ardoino, Tether’s chief technical officer, spoke last week and saw a silver lining in the crisis, at least where bitcoin is concerned. “Bitcoin may have already proven to be more solid and less subject to volatility than other coins. Bitcoin fell 60 percent, but the other altcoins fell much further. So bitcoin shows a lot more resilience,” Ardoino says. “We could see a scenario where bitcoin starts to rise in the coming months, while the rest of the ‘alt coins’ remain low.”
The elephant in the room, though, is the fact that cryptocurrencies — assets routinely touted as a hedge against inflation and the vagaries of the financial system — behave exactly like the rest of the stock market. Ardoino himself drew a parallel between bitcoin’s setbacks and the recent disastrous performance of Netflix stock, which fell 40 percent in a single day in April due to disappointing subscriber numbers.
