Crypto Nova Fallen Under Crypto Winter

Investor sentiment took another hit as investors worried that the Federal Reserve could raise interest rates more to curb inflation. Bitcoin continued its decline today, falling as much as 6.5% in the morning, hitting its lowest level since December 2020. Additionally, a range of other mainstream coins, from Ethereum to Avalanche, saw heavy losses. Investor sentiment toward the entire crypto market is very bad these days. Today, Edward Moya, senior market analyst at Oanda, said that if Bitcoin fell below $20,000, it could lead to even worse price action…

The crypto market in the cold winter

Cryptocurrency falls have been a mess recently, with BTC down to $21,000 and ETH to $1,100. In addition, the total market value of cryptocurrencies has also plummeted. According to CoinMarketCap data, the total market value of cryptocurrencies has fallen to around $900 billion, and the current total market value is about $912.2 billion (912,264,249,830), hitting the lowest point since January 2021. . In addition, with the general slump of cryptocurrencies, the total amount of liquidation has continued to soar. According to coin data, in the past 24 hours, the total liquidation of the entire network has reached 1.46 billion US dollars, and a total of 220,500 users have liquidated their positions. Among them, the BTC liquidation was $291 million, and the ETH liquidation was $436 million.

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Data source: CoinMarketCap

At present, the two major currencies, BTC and ETH, have experienced heavy declines. However, compared with BTC, ETH has been in crisis recently. Today, ETH fell below $1,100, returning to the beginning of 2021, compared to its previous high of $4,815. In comparison, it all seems like a dream, and it seems extremely unreal. In addition to the serious decline, the current market panic about ETH has also reached its peak, and the reason for this has to be the de-anchor of stETH, a token pegged to Ethereum’s ETH.

During this period of time, the de-anchoring of stETH led to the collapse of the entire encryption market, which made many people think of the tragedy of LUNA and UST, which made many people panic. After all, the influence of ETH is far greater than that of LUNA. It would be an even bigger disaster for the market. Although such a statement soon attracted technical personnel to refute the rumors, saying that it is reasonable for stETH to be slightly below 1 ETH for a long time, and it is even less likely to cause ETH to plummet, but the stETH decoupling event has already planted the seeds of panic.

In a bear market, a little bit of trouble can also set off stormy waves. Celsius began to sell stETH on Curve in exchange for ETH and sold ETH in large quantities after the thunderstorm, causing the price of stETH to fall again, which made stETH investors follow suit in panic, and then The market sentiment for ETH is starting to sink into a deeper panic.

Of course, there are no eggs in the bear market. According to L2Beat data, the total TVL of the Layer2 network fell to $4.14 billion, a new low since October 28, 2021. Among them, Arbitrum ($2.02 billion), dYdX ($959 million) and Optimism ($683 million) are the Layer 2 networks with the highest TVL, respectively.

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In addition, the NFT market, which was still active some time ago, has also begun to move towards a bear market winter. According to NFTGo.io data, when the market began to fall sharply yesterday, the floor prices of blue-chip NFT series such as BAYC and Azuki all fell by more than 20% during the day. The overall vitality of the market has also declined a lot. It can be seen that the current encryption market has entered a bear market winter in an all-round way. Although this cold winter will last for a long time, how many of the Web3 aborigines who truly believe in it are afraid of the cold winter?

Inventory of the crypto stars who fell this year

New projects in the crypto industry are always emerging, each round of bull market is always accompanied by the emergence of many new stars, and each round of bear market is always accompanied by the fall of new stars. In the blue ocean of Web3, most of the smash hit projects will end bleak, and there are very few projects that can really succeed. But even if these projects eventually fall, they will eventually provide an indispensable force for the development of Web3 and the encryption industry.

So after thousands of sails, what are the new stars of this year’s smash hit and fleeting encryption?

1 LUNA

Remember LUNA’s contrarian rally in February? When the mainstream market was sluggish at the time, LFG sold nearly 20 million LUNAs, raised $1 billion, and then used the raised money to buy BTC as a reserve for UST. This move made LUNA rise against the trend in the crypto market, which was suffering from Waterloo at that time, and a little green boo in the red bush made LUNA the most eye-catching hot spot in the currency circle.

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An overview of market growth on February 23

When LUNA was in full swing, many people in the crypto market began to express that Terra, which is developing rapidly, had the possibility of collapse. Unexpectedly, such a prediction was fulfilled in less than three months.

On May 7, 2022, Terraform Labs, the organization behind Terra, executed a planned, publicly announced withdrawal of $150 million from the Curve liquidity pool 3pool. But shortly after the withdrawal, two users exchanged roughly $185 million in UST for USDC within two hours, attacking the less liquid and vulnerable mining pools. Terraform Labs then pulled another 100 million UST from 3pool to rebalance it. However, these two large transactions directly caused UST to break away from the peg with the US dollar, triggering a large-scale sell-off on the exchange, and the large-scale sell-off made the UST unpegged even more severely.

On May 9, UST’s custodian, the Luna Foundation Guard (LFG), sold billions of dollars worth of BTC reserves to reverse UST from the market in order to save the token’s peg. In the end, however, LFG was unable to save UST from the death spiral.

It is also worth noting that the algorithm that pegged UST to the US dollar is a minting and burning mechanism between LUNA and UST, and under this mechanism, after UST loses its peg, there will be huge arbitrage opportunities (users can get Buy lower value UST and burn LUNA for $1). This also led to a large number of LUNA being minted, and finally LUNA started a plunge mode in the case of hyperinflation, and finally returned to zero. The algorithmic stablecoin empire collapsed overnight.

2、Celsius

Among DeFi lending platforms, Celsius Network is quite typical. Celsius is a larger wealth management platform and is relatively well-known in the United States. However, amid the recent market turmoil, Celsius announced yesterday that it would suspend all withdrawals, transactions and transfers. The official reason given was extreme market conditions and the need for stable liquidity, and said the move was for the benefit of the entire community. . After the news came out, Celsius’ token CEL started a plunge mode.

The direct cause of Celsius’ collapse seems to be due to the de-anchoring of stETH, but the liquidity crisis faced by Celsius this time is also the fruit of its own planting. Previously, Celsius promised depositors up to 8% of the Ethereum deposit income, in order to achieve this income , Celsius chose to replace a large amount of ETH with ETH2.0 derivatives such as stETH to obtain pledge income, which also directly led to a lot of funds that Celsius could not get back, and thus fell into the dilemma of insufficient liquidity today.

It’s worth noting that a large part of Celsius’ debacle may have been due to the lame investment capabilities of its team. The first is the UST that had invested in it before. Celsius was honored to be one of the seven whale wallets that contributed to the collapse of UST. Although the loss of funds in the UST incident was not too much, as soon as the news was disclosed, Celsius fell into a crisis of trust and a large amount of funds Start to speed up the evacuation of Celsius. This became the trigger for Celsius to crash.

In addition, the two stolen experiences of Celsius have also been picked up. Celsius Network lost at least 35,000 ETH in the May 2021 Stakehound key loss crash, but it is very interesting that Celsius has been stolen since then. “Secret not to be mourned”, users did not know about the theft until June 6, 2022, after Dirty Bubble Media first disclosed relevant information. Additionally, Celsius lost $50 million in the Badgerdao hack.

Faced with a hole that could not be filled, Celsius eventually chose to suspend all withdrawals, transactions and transfers, and Nexo’s proposal to acquire Celsius seems to be declaring Celsius’ bankruptcy.

3、Axie Infinity

Speaking of popular projects in 2021, Axie Infinity, the former king of chain games, must have a place. In the week of August 8, 2021, the game earned over $215 million at its peak. In October last year, Axie’s creator Sky Mavis was valued at $3 billion following a $152 million funding round led by a16z. However, since November 2021, Axie Infinity has started a steady decline mode, and its revenue has fallen again and again, especially after the large-scale hacking attack on the side chain Ronin Network where Axie Infinity is located in March. Item data has plummeted. 

In addition, according to CoinMarketCap data, Axie Infinity’s game token SLP has also been falling since November, and has now fallen to $0.003, but has fallen 99% from the previous record high of $0.4191. It is clear that SLP is in a crisis of zeroing.

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At present, the economic activities of Axie Infinity mainly rely on two functions – fighting and breeding, using Axie pets to earn AXS and SLP tokens, and at the same time consuming AXS and SLP through Axie pet breeding. From this, it can be seen that the game token SLP is the core token of Axie Infinity. Once SLP is zero, Axie pets will become worthless, and the Axie Infinity ecosystem will collapse.

However, it is worth mentioning that Axie Infinity is different from LUNA and Celsius. The problems encountered by Axie Infinity are problems that exist in the entire chain game market, and they have not reached the point of exhaustion. The Axie Infinity team is also working hard to promote the development of the project, trying to solve the problem of token value preservation, and trying to pull Axie Infinity out of the death spiral. Therefore, although it is not known whether Axie Infinity can survive this long winter, it can be seen that Axie Infinity still has a bit of confidence to make a comeback.

write at the end

Today, the crypto market is generally in a downturn. It is foreseeable that the bear market will still take a long time. Finally, in the long winter, the exhaustion and despair brought by the bear market will be felt again. Many people may lose confidence and eventually leave. But more people will choose to believe in the coming of light.

At present, the crypto market is still in a stage of rapid development, and many projects are in the stage of exploration, and the bear market will be the best cradle to explore technology. Focusing on the value of the Web3 project, I believe that after the bear market tempering, the Web3 project will be greatly improved again.

Of course, the projects that have fallen in this bear market are not to be rejected together. There is a kind of failure that is called the glory of defeat. The fallen projects will become the cornerstone of Web3 development, and more projects will continue to improve and progress on this basis. The next bull market.

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/crypto-nova-fallen-under-crypto-winter/
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.

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