CHENNAI: The JPG NFT Index Price, which tracks high-profile token collections, has dropped nearly 70% since its launch in April. Earlier this year, an NFT of former Twitter CEO Jack Dorsey’s first tweet that sold for $2.9 million in 2020 made headlines when the owner tried to resell it for $48 million, only to receive a high bid of about $280 by the end of the auction. Red flags all the way. Crypto lender Celsius recently also filed for bankruptcy recently and became the latest casualty of a bear market that continues to leave in its aftermath, a path of destruction in the digital currency sector.
Fears of global recession and the worst inflation in more than 40 years have wreaked havoc on the cryptocurrency market this year— unleashing a fierce crypto winter that’s forced once high-flying firms into bankruptcy and pushed investors into panic-selling mode. The turmoil has already claimed trillions of dollars in market value, billions of dollars in frozen funds and thousands of jobs, but current casualties may only mark the beginning of the storm. Trillions in value have been erased in a few months. The low interest rates and government stimulus measures had fuelled skyrocketing cryptocurrency prices during the pandemic, but the Federal Reserve’s decision to curb rising inflation by hiking interest rates has since battered investor sentiment and ushered in some of the crypto market’s biggest losses in history. Has now made way for the market’s worst first half ever and has spiralled south to about $920 billion, a roughly 60% drop this year.
Compounding the bearish sentiment, Terra’s luna token, a once top cryptocurrency worth more than $40 billion, lost virtually all its value within a week in May as markets collapsed. Meanwhile, top cryptocurrencies bitcoin, ether and BNB have plunged from record highs. Confronted with steep market declines, cryptocurrency companies have laid off more than 2,000 workers in less than five weeks. Coinbase laid off 1,180 employees, or about 18% of its workforce. Gemini, the exchange founded by the billionaire Winklevii twins, said it would cut about 10% of its 1,000 employees, and exchanges Crypto.com and BlockFi said they would terminate 5% and 20% of their workforces, affecting some 260 and 170 employees, respectively. The cuts have only worsened as now OpenSea laid off about 20% of its workforce. The reality is that markets have entered an unprecedented combination of crypto winter and broad macroeconomic instability.
Financial markets need to mature and evolve over a period of time and if we study broad trends, it would take cryptocurrency prices at least six to 18 months up to two years—before recovering, similar to cycles past and when they do, it’s going to be more sustained and healthier, with less speculation and more tried and true investment philosophy. There will be many more companies that would fall by the wayside and personally I don’t think it ends here. Close to a dozen firms including Vauld—face an uncertain fate after locking customers out of their funds or initiating restructuring proceedings over the past month. But let’s look at the silver lining… we will see the emergence of companies with enhanced sustainable models and fundamentals as they would now work on customer-centric and risk mitigated strategy rather than ride a success wave without contingency planning.
(The writer is Founder, India Blockchain Alliance)