Analytical platforms Glassnode, CoinMarketCap and CMC Research released a new report in which they review the first half of the crypto market from an on-chain perspective.
According to this, Bitcoin (BTC) in June looks back on almost the worst month ever with a price drop of 37.9 percent. Ethereum (ETH) fared no better. With a price drop of over 45 percent, ETH also posted the second-worst monthly result in its history in June 2022.
The reason may be the general avoidance of risky assets, which has particularly spread to the major international stock exchanges as a result of the macroeconomic difficulties of the first half of the year. This risk-averse attitude is also causing problems for the crypto market.
The big "deleveraging" - the reduction of debt - which triggered devastating chain reactions and flushed a lot of liquidity out of the market, was known to be the undoing of Three Arrows Capital (3AC), Celsius, Voyager Digital and Terra (LUNA).
How much crypto investors were passionate about this can be seen in the report based on the different blockchain data.
Stability wanted, risk avoided
The DeFi sector is experiencing a major exodus of money in 2022. From an all-time high of $253 billion in total value locked, the sector is down 71.5 percent in the first half of the year. That means $181 billion has left the ecosystem.
According to Glassnode, this capital migrated in part from the DeFi area to the stablecoin sector. For the first time, the aggregate value of the four largest stablecoins (DAI, USDT, USDC, and BUSD) was greater than Ethereum. After the UST debacle, centralised, regulated providers such as Circles USD Coin (USDC) were favoured. In the report, Glassnode calls this move a veritable "flight to stability."
Big losses for crypto users
The report further reveals that Bitcoin Hodler recorded over $6 billion in unrealized losses in May as the Terra ecosystem imploded in three days.
The ensuing collapse of 3AC and other players led to the largest capitulation just a month later, with unrealized losses in just one day amounting to $4.23 billion. For comparison: At the peak of the corona panic in March 2020, it was 1.35 billion US dollars.
According to the report, Ethereum was not doing much better either. Coinciding with Bitcoin, ETH investors witnessed two equally strong moments of capitulation, each around $2 billion. The panic in the markets that followed the Terra collapse has come to be dubbed the “Lehmann Brothers moment” of cryptocurrencies.
The percentage price losses from the all-time high for BTC and ETH are comparatively moderate compared to past bear markets. However, the severity, scope and speed of the price falls in May and June were unique for the still young crypto market, according to the report.
The aftershocks of the Terra implosion are therefore still being felt and are likely to change the crypto landscape forever.
Reports from DappRadar and Civic Science suggest these losses have largely been realized. Surveys by Civic Science show that almost 46 percent of the investors surveyed are said to have sold part or even all of their crypto assets .
An unsurprising trend: 39 percent of all investors with an annual income of less than 50,000 US dollars had to liquidate their entire crypto portfolio. Investors with higher annual salaries above $150,000 were able to continue hodling.
It also showed that investors with investment experience in the traditional sector were less impressed by price fluctuations in the markets and more likely that prices could eventually recover.
However, confidence in the individual crypto sectors seems damaged for small investors for the time being. 58 percent of those surveyed now consider the comparatively high volatility of cryptocurrencies to be the biggest argument against an investment.
The events surrounding the crash of the LUNA token and UST also made 23 percent of participants question the legitimacy of cryptocurrencies, according to Civic Science.
According to Glassnode and Co., the general expectations of the crypto market have changed for many users. But especially in times of great doubt and uncertainty, crypto investors often see opportunities to get in ahead of the next potential upleg.
According to the report, the historic drop in prices has also ensured that highly speculative capital and negligent players have almost completely left the market: a much healthier overall picture is now emerging.
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