The Catalyst Behind the Recent Crypto Market Crash Revealed
There’s enough going on in the web3 market that it will take us a moment to unpack the situation this morning. However, leading indicators of sentiment in the blockchain ecosystem are sufficiently nasty to set the stage:
- Bitcoin is off around 13% in the last 24 hours to $23,436.
- ETH is off around 15% over the same time frame to $1,219.
- Solana’s token is off approximately 15% in the last day to $26.75.
The three tokens are down roughly 26%, 36%, and 39%, respectively, over the last week. It’s essential to understand what’s driving this downturn in the web3 market.
A Crisis at Celsius Networks
The biggest driver of concern this morning appears to be a crisis at Celsius Networks, which raised a huge chunk of venture capital last year. The company has halted withdrawals after its token crashed, sending shockwaves throughout the web3 community.
This development doesn’t mean that there is no money flowing in the startup world — even some less tech-focused ideas are busy raising big checks. However, what’s going on in the blockchain domain? Let’s take a minute to explore that question from a few angles.
Trading Volumes and Enthusiasm for On-Chain Assets
- Trading volumes are declining: After hitting a peak of $2.23 trillion in May 2021, crypto exchange trading volumes fell below the $1 trillion-per-month mark at the start of 2022.
- Decline in enthusiasm for on-chain assets: The most popular blockchain for NFTs (Ethereum) and the most popular NFT marketplace (OpenSea) are seeing falling activity levels, and the trend appears to be gaining pace.
Decentralized Finance (DeFi)
Another former bright spot in web3 — DeFi — is falling apart:
- Decentralized finance has had a rough year.
- The Terra/Lunacollapse was a body blow, and since then, the erosion and recent freezing of the Celsius Network have only added to the mess.
The Market for Crypto Talent
One result of this downturn is more layoffs:
- Crypto.com is laying off staff.
- Coinbase is yanking offers and freezing hires.
- Gemini has laid off employees.
The market for crypto talent has shifted rapidly and sharply. As recently as February, Coinbase was publicly stating that it was going to hire ‘up to 2,000 employees across [its] Product, Engineering, and Design teams.’ That has flipped into a hiring freeze.
Why the Downturn Won’t Rectify Soon
Given that the crypto markets operate in part on sentiment, it’s likely that this downturn won’t rectify soon. The market will continue to be affected by the crisis at Celsius Networks and the decline in trading volumes and enthusiasm for on-chain assets.
Investor Confidence
It seems likely, then, that crypto venture funding will not look too poorly this month compared to a year earlier, indicating that investors have not lost faith. However, we do wonder what July might bring.
Conclusion
The web3 market is currently in a state of turmoil, with leading indicators of sentiment in the blockchain ecosystem being sufficiently nasty. The crisis at Celsius Networks and the decline in trading volumes and enthusiasm for on-chain assets are major contributors to this downturn.
While investor confidence remains intact, it’s essential to monitor the situation closely and be prepared for any potential changes in the market.
