Is crypto winter upon us? It certainly seems that way.
According to Google Trends, fear, uncertainty, and doubt (FUD) around cryptocurrency and crypto-assets is top of mind as we search out the term “crypto winter”:
Crypto winter, according to the World Economic Forum, is the situation where “prices [of cryptocurrencies and cryptoassets] have dropped a long way and then stayed low for weeks or months”
But is it really just FUD that’s fueling concerns? As noted in the Harvard Business Review:
“The past few months have been dark times for the crypto industry. Between April and June, Bitcoin’s value more than halved, from just over $45,000 to around $20,000; other coins have fallen even more. The Terra-UST ecosystem, which paired a crypto coin with one designed to be pegged to the dollar, collapsed in May, wiping out $60 billion worth of value and leading to cascading failures among crypto lenders. Established companies like Coinbase, a popular crypto exchange, have announced layoffs.”
With respect to Coinbase, they are laying off 18% of their staff (1,100 people) and have explicitly stated that it is due to the coming “crypto winter”:
"We appear to be entering a recession after a 10+ year economic boom. A recession could lead to another crypto winter, and could last for an extended period…"
With respect to the epic Terra-Luna collapse, we should keep in mind that it’s collapse rivals the Bernie Madoff Ponzi-scheme, which was in the $60 billion range as well. For more on what happened, check out Coffeezilla’s take on the matter:
Coffeezilla got his start exposing fake gurus, but now is actively exposing crypto-scams. As he notes in the New Yorker:
“Crypto scams are like discovering fentanyl when you’ve been used to Oxy. It’s a hundred times more powerful, and way worse.”
Beyond the Terra-Luna collapse, he has a great video on Celsius, a crypto-lender that offered exorbitant interest rates on deposits:
Celsius attempted to ride the anti-bank sentiment claiming that it wasn’t a bank, but they took deposits and then lent out loans on interest – which is exactly what a bank does.
Now they are no more: they have filed for Chapter 11 bankruptcy. In an added twist, they are claiming that the people who deposited funds with them are not account holders. Adam Levitin, a Georgetown law professor, explained to CNBC that:
“The treatment here seems to be that the customer’s crypto is actually the company’s property, and as an unsecured creditor, you don’t get your bitcoins back”
But is it really just FUD that’s fueling concerns? As noted in the Harvard Business Review:
“The past few months have been dark times for the crypto industry. Between April and June, Bitcoin’s value more than halved, from just over $45,000 to around $20,000; other coins have fallen even more. The Terra-UST ecosystem, which paired a crypto coin with one designed to be pegged to the dollar, collapsed in May, wiping out $60 billion worth of value and leading to cascading failures among crypto lenders. Established companies like Coinbase, a popular crypto exchange, have announced layoffs.”
With respect to Coinbase, they are laying off 18% of their staff (1,100 people) and have explicitly stated that it is due to the coming “crypto winter”:
"We appear to be entering a recession after a 10+ year economic boom. A recession could lead to another crypto winter, and could last for an extended period…"
With respect to the epic Terra-Luna collapse, we should keep in mind that it’s collapse rivals the Bernie Madoff Ponzi-scheme, which was in the $60 billion range as well. For more on what happened, check out Coffeezilla’s take on the matter:
Coffeezilla got his start exposing fake gurus, but now is actively exposing crypto-scams. As he notes in the New Yorker:
“Crypto scams are like discovering fentanyl when you’ve been used to Oxy. It’s a hundred times more powerful, and way worse.”
Beyond the Terra-Luna collapse, he has a great video on Celsius, a crypto-lender that offered exorbitant interest rates on deposits:
Celsius attempted to ride the anti-bank sentiment claiming that it wasn’t a bank, but they took deposits and then lent out loans on interest – which is exactly what a bank does.
Now they are no more: they have filed for Chapter 11 bankruptcy. In an added twist, they are claiming that the people who deposited funds with them are not account holders. Adam Levitin, a Georgetown law professor, explained to CNBC that:
“The treatment here seems to be that the customer’s crypto is actually the company’s property, and as an unsecured creditor, you don’t get your bitcoins back”
What does this all have to do with the crypto-winter?
These crypto-collapses have had a material impact on the industry. Reuters linked the 14% price drop in mid-June 2022 to Celsius freezing “withdrawals and transfers”.
With such spectacular disasters, what is in store for world of crypto and the promise of Web3? That's the topic we will explore in our next post!
With such spectacular disasters, what is in store for world of crypto and the promise of Web3? That's the topic we will explore in our next post!
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