Crash of the Crypto: Why are cryptocurrency investors fleeing?
India Today
The market credibility of cryptocurrencies is at stake even as investors become victim to plummeting market value.
The digital assets industry is under strain. The market capitalisation of cryptocurrencies slumped to below $1 trillion on Wednesday, June 15, from nearly $3 trillion in November 2021. As the volatility in the cryptosphere increases, and investors continue to dump risky assets, the future of supposedly decentralised currencies feels shaky at best.
The current crypto crisis is not like the one in 2018. Back then, Bitcoin’s value fell by 80 per cent. But it recovered and went on to set new highs. However, this time, the market credibility of cryptocurrencies is at stake. It is also not showing any revival signs so far. Coinbase CEO Brian Armstrong fears “another crypto winter”.
The trigger for the crisis started two weeks ago when Luna's sister currency, the stablecoin TerraUST, lost its peg to the US dollar. TerraUST is algorithmically linked to Luna. Luna virtually disappeared after the collapse of TerraUST. Its value plummeted from $20 billion to almost zero in just a few days. All this left a trail of victims among investors.
Another big shock for the market was the experimental bank Celsius freezing withdrawals. Celsius had sold its lending service to customers, which was based on customers' crypto deposits.
"The actual use case of cryptos has been dwarfed by the massive infrastructure of speculation built upon it. This is a natural correction going on now. As the use cases increase, cryptos will again be able to bear expanded speculation," Dr Sanjay Sharma, a cryptocurrency expert, told India Today.
Cryptocurrencies are now worth less than $1 trillion, one-third of their value seven months ago. The world's largest digital currency, Bitcoin, tumbled to $21,105 — its lowest since the end of December 2020. Other cryptocurrencies also followed the same path as a broader selloff continued.
Coinbase announced on Tuesday that the cryptocurrency exchange will cut about 1,100 jobs or 18 per cent of its workforce. Additionally, companies like BlockFi and Crypto.com have reportedly slashed hundreds of jobs.
