By the end of May, Bitcoin’s (BTC) price had dropped 40%, Ether (ETH) had lost 50% of its value, and the entire crypto market dipped below its $1-trillion capitalization for the first time since January 2021. As we enter a clear bear market trend, it’s essential to focus on what the blockchain industry has always suggested: build.
Bitcoin, Ether and the broader crypto market’s downturn correlate to macroeconomic uncertainty. The uncertainty is driven by rising interest rates coupled with quantitative tightening, resulting in asset price sell-offs across the stock exchange and the crypto market. It’s entirely possible that we can see the repeat of events like the Terra ecosystem’s unwinding, crypto lending service Celsius’ fallout, and the hedge fund Three Arrows Capital’s $400-million liquidation losses.
2022’s market crash to 2018’s crypto winter
The 2018 crypto winter was brought about by negative market sentiment and loss of confidence; however, 2022’s crypto winter is a direct result of macroeconomics. Decentralized finance (DeFi) is down, equities are down and global markets are down. This bear market is not isolated to crypto alone, with leverage unwind simultaneously occurring across several markets.
Venture capitalists and private investors pumped no less than $30 billion into blockchain projects. A third of that amount went to gaming and virtual world projects to lay the foundations of the Web3 metaverse.
As we witness an exodus of talent from Web2 projects, we also anticipate increased growth of Web3 brands, with several brands such as Yuga Labs, The Sandbox and RTFKT already partnering with retail giants, including Adidas, Nike, HSBC, Warner Bros and others. Blockchain-powered decentralized applications (DApp) and DeFi have the potential to lead the Web3 evolution in the future and seize control from a handful of centralized gatekeepers.
This indicates that the transition to Web3 is imminent and dependent on a catalyst to proliferate. A crypto winter can undoubtedly be considered a…