Coingecko Crypto Makret Quarterly Report 2022Q2
As investors go risk-off in an unforgiving macroeconomic environment, the first major crypto domino block to fall was Terra, which was still on the ascend as close as Q1 2022. At peak, LUNA and UST reached $40B and $18B in market cap, respectively. The death spiral was swift - the entire scheme unraveled within a week due to a tsunami of panic outflows. The effects of this collapse are still being felt today as we continue to uncover entities that have recklessly aped into UST.
Major price drawdowns across all crypto assets also caused cascading liquidations of leveraged positions, wiping out many. Weekly multi-billion dollar liquidations on CEXes become commonplace, as speculators repeatedly got rekt. Most prominent was Three Arrows Capital, which is now facing bankruptcy and liquidation. Many CeFi crypto lending firms, the source of much of this leverage, are now staring at bailouts or bankruptcy. While DeFi protocols continued chugging along, the value of their tokens, as well as TVL, were not spared.
The NFT segment was no different as overall NFT trading volumes fell by 26% from the peak. However, floor prices of blue chips have not fallen much in native token terms, perhaps a sign of resilience. This quarter also saw the emergence of Solana NFTs, with their introduction on OpenSea bringing an infusion of interest.
However, Magic Eden has reaped most of the benefits thus far. On Ethereum, there’s been more diversity in NFT trading activity, with LooksRare and X2Y2 showing signs of renewed interest.
With everything looking all doom and gloom this quarter, are there any silver linings to look out for? Firstly, it’s important to zoom out to see how far we’ve progressed. Just three years ago, crypto was mainly just BTC, ETH, and speculation on CEXes. Today, we have multiple altchains with their own ecosystems. DeFi has become table stakes for every chain. And NFT enthusiasts have formed their own communities within crypto while spurring the GameFi and Metaverse narratives.
Secondly, the bursting of the bubble allows the industry to flush out a lot of the excesses accumulated throughout the last bull run. By the end of last year, it was clear that the hype surrounding crypto had far outpaced actual progress and was never going to be sustainable. While there will always be collateral damage from market pullbacks, it helps to refocus the industry on the genuine fundamentals instead of chasing the next “number-go-up-only” scheme.
Finally, we want to reiterate what we said last quarter - challenging markets are the best times to BUIDL. The Ethereum merge is in its final stretch, altchains are still receiving funding to figure out scalability solutions, and DeFi projects are still announcing new products. While CEXes may be cutting back headcount, many projects are still hiring.
We remain bullish on the long-term sustainable development of the crypto industry. We will continue to work hard to polish our products and develop new features, and provide more in-depth and quality research content in the future.
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Three Arrows Capital