Hardly any investor would have made the forecast in the 2021 bull market: Bitcoin will fall to 20,000 US dollars in the summer of 2022. Crypto is not in a good light due to the problems surrounding Celsius, 3AC and Terra. What was different in 2017? And why did this crash happen?
The market is currently in the so-called crypto winter. So time to work through the currencies on Coinmarketcap and to acquire knowledge. Because only those who know which coins could dominate the market can make a lot of money in the bull market.
But why are we in a bear market at all? And what is different this time compared to 2017? Should you buy now? Or invest later?
Over $2 billion in market cap has been scavenged since November 2021. This equates to a drop of almost 70 percent, which is still better than the low of 2018, when it was around 87 percent.
To everyone's surprise, Bitcoin , with a price of minus 70 percent, is still just ahead of Ethereum with minus 80 percent. The list of all cryptos is still mostly red.
Bitcoin's dominance over the rest of the crypto market
It is striking that BTC could not really maintain its market dominance in either a bull or bear market. While it was still around 90 percent before the whole ICO hype, this dominance steadily decreased in the following years. Bitcoin is now at comparable values, as it was at the low in 2018: around 35 to 40 percent.
Why is this?
Among other things, the emergence of the many different blockchains with all their advantages and disadvantages. DeFi , stablecoins, NFTs and much more: The list is now a lot longer than it was in 2018.
It is precisely these opportunities that have brought us into this position.
Web 3 companies on the rise: Ethereum made it possible
In 2014, Vitalik Buterin added an important feature to the blockchain with the Ethereum project: Smart Contracts. Without the programs, we couldn't even set up simple DeFi protocols these days.
Then, three years later, the problem begins: The ICO bubble. Many critics still compare this to the dot-com bubble of the 1990s and 2000s. Things went well for a long time: In some cases, 1000 percent and more could be generated almost overnight. Every product found a buyer in a highly unregulated market.
Elections on the blockchain? No problem! The next decentralized Facebook? Of course! Smartphones with a decentralized operating system? It may take Apple a year to make a new phone, but we produce it in 2 weeks!
The promises were great – the disillusionment that followed was even greater. How long the fundraising continued after the bubble burst can be seen in this graphic:
Investing in ICOs was easy back then
Investing was made easy back then. An investor needed a wallet and ETH back then, then he could get started. Quickly on the whitelist and then 1000 percent profit tomorrow.
The bear market had to come and brought many ICOs to ruin. Nothing came of the promise to later be able to exchange tokens for services or products. Who could have even guessed something like that in retrospect?
News about Celsius, 3AC and Terra overshadow the market
While it was mainly the ICO boom in 2018, several factors are now playing a role. On the one hand, the FED and the ECB, after two years of money printing, have realized that this cannot continue and have or will raise the key interest rate.
In order to combat inflation, the American Federal Reserve is not afraid to take radical steps: it wants to reach around 3 percent by the end of the year. The ECB is taking it a little easier, but is now also raising interest rates.
Since the crypto market has had a high correlation with stocks, especially the NASDAQ, since the beginning of the COVID pandemic, prices are sailing south together.
Decentralized finance in particular offered the big players on Wall Street the opportunity to enter into lucrative deals. Among them is a well-known candidate: Celsius. But the bad news actually starts with Terra Luna and Three Arrows Capital (3AC).
Recipe for a Bear Market: Failed stablecoin, over-leveraged lending service and leveraged hedge fund
The decentralized banks already started issuing loans against collateral in the DeFi summer of 2020. More recently, cryptocurrency funds and lending services have also been investing in the protocols on promises of high interest rates.
Best example: Terra Luna on Anchor with 20 percent interest. Martin Green, CEO of Cambrian Asset Management, comments on this .
“2020 and beyond show increased utility for DeFi shadow banking.”
In his opinion, the lent assets (loans) were often under-collateralized. Then, when prices started falling in the second quarter, everything was set for disaster.
First, the then third-largest stablecoin UST from Terra Luna collapsed – Celsius and 3AC were the reaction to this. Celsius took its customers' money, lent it to others on platforms and offered up to 18 percent in return. But when the market turned around, Celsius quickly realized that there was no liquidity available for customer withdrawals. The rest is history.
3AC was not spared from the bad news either. The hedge fund had invested a lot of capital in the Luna ecosystem - then last month a position on BlockFi was liquidated because it could not repay the loan. Result: bankruptcy according to American law.
To top it off, even Voyager Digital filed for bankruptcy a few days ago. Mutual claims with Alameda Research, Sam Bankman-Fried's investment firm, worth $450 million are at stake.
The moral of the story: The bankrupt companies are without exception companies from the “centralized finance” sector. Although protocols such as MakerDAO, Aave or Balancer have lost market capitalization, they are still in excellent shape. They will probably generate even more fees than before due to the numerous liquidations.
So when will the crypto winter be over, we wonder?
To be honest: we don't know! Analysts expect further price fluctuations due to the difficult macropolitical situation. In any case, buying tokens has never been easier than it is now. Sign up, verify, get started - it's easy! Just don't forget to HODLN afterwards.
Disclaimer
All information contained on our website has been researched to the best of our knowledge and belief. The journalistic contributions are for general information purposes only. Any action that the reader takes based on the information found on our website is entirely at their own risk.
My Top PicksHoneygain - Passive earner that pays in BTC or PayPalMandalaExchange -The Best no KYC crypto Exchange!
BetFury - Play And Earn BFG for daily Bitcoin and ETH dividends!
Pipeflare - Faucet that pays in ZCash and Matic, Games pay in DAIWomplay - Mobile dApp gaming platform that rewards in EOS and BitcoinCointiply - The #1 Crypto Earning SiteLiteCoinPay -The #1 FaucetPay earner for LitecoinLBRY/Odysee - YouTube Alternative that lets you earn Money by viewing videos!FaucetPay - The #1 Microwallet PlatformFREEBTC - The #1 FaucetPay earner for Satoshi'sFaucetCrypto - An earning/faucet site that pays out instantlyFireFaucet - An earning site that pays better for some than Cointiply
DogeFaucet - Dogecoin Faucet
xFaucet - BTC, ETH, LTC, Doge, Dash, Tron, DGB, BCH, BNB, ZEC, FEY - Claim every 5 minutes
Konstantinova - BTC, ETH, LTC, Doge, Dash, Tron, DGB, BNB, ZEC, USDT, FEY, 25 Claims Daily
Comments
Post a Comment