Celia Zeng, DeFi Asset Manager at Cabital, talks about the survival of the world’s strongest cryptocurrencies.
This week, the price of the main cryptocurrency, ostensibly pegged to national currencies such as the US dollar, has fallen. This has again sparked calls for the US Congress to authorize the regulation of stablecoins.
Volatility has been a buzzword in the crypto industry over the past few months. Thus, short-term factors prevailed over long-term expectations, which led to the optimization of key players and instruments. Might of the Strong continues to strengthen the industry by weeding out unreliable or unethical players.
Cryptocurrency prices reached their lowest levels in January and February 2022. This was followed by a peak in March and then a reversal in April and May. The NFT sub-market experienced a decline in prices and liquidity with a significant reduction in the user base. On the other hand, the big names in the industry have strengthened their presence legally and practically.
Growing adoption of the crypto industry
The Metaverse sector, represented by Decentraland (MANA), Sandbox (SAND), and Axis Infinity (AXS), delivered outstanding results in February with an annualized return of 1851%. BTC and ETH improved their performance in February and March before collapsing again in April. The secure nature of the industry’s leading cryptocurrencies continues to support market leaders.
Curve, MakerDAO, and Lido Finance retained their top three spots among DeFi protocols by total value locked. Lido Finance remained one of the most undervalued protocols in terms of market cap to total value locked. The DeFi sector saw sales but continued to outperform traditional cryptocurrencies.
The entry of the largest companies into the cryptocurrency sector has become more obvious. McDonald’s has filed at least 10 trademark applications in line with its metaverse plans. JPMorgan became the first bank to enter the virtual world by opening the Onyx Lounge in Decentraland. Super Bowl LVI participants will receive commemorative NFTs along with their tickets. The presence of companies in the crypto sector is synonymous with a larger user base and greater capital inflows with growing demand.
Fashion is also present in GameFi, and some tech giants like Facebook have announced their intention to get involved in the metaverse and gaming sector.
Traditional gaming platforms such as UniSoft are planning to integrate blockchain technology into their business and technical models, including the use of NFTs.
In 2021, the NFT market was worth nearly $25 billion. Net sales are expected to reach at least $35 billion this year. Based on the current growth rate, observers predict that the NFT market will reach $80 billion by 2025.
The legal side of the crypto industry is also showing signs of volatility. The Securities and Exchange Commission (SEC) has launched an investigation into the Mirror Protocol, which allows trading in synthetic versions of popular US stocks.
The commission even sent a subpoena to the CEO of Terraform Labs as a US District Court judge ordered the demands to be met.
The international crypto community has opposed an attempt by the EU and the European Parliament to block or restrict Proof-of-Work assets through the Crypto Assets Bill (MiCA), namely 61(9c).
In February, the Ukrainian Parliament adopted a law on the legalization of cryptocurrencies, and Volodymyr Zelensky signed it in March.
Investment and venture cases
The investment community saw the temporary decline in the market capitalization of the crypto industry as a good investment opportunity. Capital investment in the blockchain and crypto industry reached $14.6 billion in the first quarter of 2022, almost half of the $30.5 billion invested in all of 2021. Thus, the early introduction of the industry still provides a wide range of investment opportunities. In addition, some see crypto assets as a hedge against rapidly rising USD price inflation.
Biggest Investment: Sequoia Capital and Paradigm invested $1.15 billion in Citadel Securities, the biggest deal in the crypto industry in the first quarter of 2022. The deal marked Citadel Securities’ refocusing on new asset classes, including digital currencies. Cross River has invested $620 million in crypto solutions.
M&A: When looking at the biggest M&A in the crypto space, we can mention Silvergate Capital, which acquired Diem in January, Fireblocks, which acquired First Digital Trust in February, and Blockchain.com, which acquired Diem in January, acquired Altonomy in March. . The Web3 sector attracted the largest share of investment, accounting for 26.5% of the total in the first quarter of 2022.
Sustainability: The industry has also shown how it can mobilize around good causes. Decentralized autonomous organizations have stepped up their efforts as Russia is at war with Ukraine. Only DAO Ukraine earned $6.75 million from the sale of NFTs with the image of the Ukrainian flag. The crypto fund created by the Ministry of Digital Transformation of Ukraine has raised over $60 million in donations. These examples illustrate how the cryptocurrency industry removes barriers and red tape for good.
Risks and hacks
Like any business or bank, the cryptocurrency industry remains vulnerable to hacker attacks. They expose vulnerabilities in networks and exchanges through replay attacks, creditor board entries, direct hacks, and other tools. The good news is that each crisis strengthens its participants and the entire industry by addressing the weaknesses mentioned and closing the loophole for future hacking attempts.
Among the victims of recent hacks in March-May 2022 are Agave DAO, Cashio, Revest Finance, Ronin Network, Voltage Finance, Inverse Finance, Elephant Money and Beanstalk. These attacks usually result in multi-million dollar losses. For example, out of $181 million stolen from Beanstalk, the attacker managed to save $76 million.
What is the future of the crypto industry?
The fundamentals point to the future growth of the crypto industry. Temporary short-term volatility represents investment opportunities and a solid basis for M&A. We advise “BUIDL” (Build Useful Stuff) by developing a solid infrastructure and investing in solid projects. This will avoid the risk of losing profits during a recession and create new capital flows in the industry.
about the author
Celia Zeng is a DeFi Asset Manager at Cabital. The company aims to make it easier to invest in the world of crypto by challenging the misconceptions associated with it.
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