Crypto started out as something where people who are tech-geeks or people who are already knowledgeable on the subject of virtual currency were investing in it. In came 2021 and crypto took the whole world by storm. Now everyone from a 16-year-old to a 45-year-old wanted to get on the bandwagon and earn money from investing.
The numbers speak for themselves, as in the calendar year 2021, venture capitalists from all around the globe invested around $30 billion in numerous crypto startups. But as the saying goes, “all good things are not permanent”, Bitcoin has fallen 70% from what its record high used to be. Accompanying them, a number of altcoins have taken the hit too.
The beginning of this loss can be traced back to when Luna went down because Terra had lost its peg to the US dollar. UST is pegged to the US dollar so one UST is supposed to have around the same value as 1 dollar. UST is kept stable by an algorithm that burns (permanently destroys) Luna tokens to mint (create) UST tokens.
Multiple factors played in the meltdown of crypto and people need to understand that it is a fairly new market to explore. The industry is unmonitored for the most part and quite a few people ignore the red flags they see because everyone is here to earn loads of money.
Ultimately, Luna fell in value by 99.9%. This situation, similar to hyperinflation, unexpectedly caused huge losses to crypto investors.
Add to that the fact that some veterans from the finance industry stand strong with the digital currency. Recently, Bank of England Deputy Governor, Jon Cunliffe, compared the crypto meltdown in May, where known names such as Bitcoin, Ethereum, and Terra’s Luna suffered huge losses, to the dot com crash that occurred at the beginning of the year 2000. He is a firm believer in crypto is here and here to stay.
If you are someone who has followed Crypto closely, you would know that it has gone through a lot of literal ups and downs. These down phases are commonly known as “cryptocurrency winter”. The crypto market has certainly seen some good days as last November it skyrocketed to $3 trillion including all assets. The beginning of May saw the estimated value at $1.65 trillion whereas now its plummeted down to less than $1 trillion.
Trouble also brewed for major crypto players such as Babel Finance, Celsius Network, and Three Arrows Capital as the prices went down. Three Arrows Capital even failed to repay a loan worth $350 million. At the beginning of this week, Bitcoin fell by about 3.5% to $20,650. These numbers also led to known exchange firm Coinbase putting a hold on hiring more people for the foreseeable future, at the beginning of this month.
Luckily, because Crypto is as mainstream as ever now, investors who previously would only be interested in traditional investments are now making crypto a part of their portfolio. As the financial sector seems to be plummeting all around the globe, crypto has been smart enough to utilize social media and marketing to its benefit. Ultimate Fighting Championship (UFC) has a $175 million sponsorship deal from the leading trading site, Crypto.com.
So it’s assured that the virtual currency is seen. With this visibility and the success that crypto enjoyed during its previous peak, it’s safe to say that this is not going to be the end of it. Venture capitalists are surely more observant of where their money is going, but still, the investments continue.