The crypto bear market is finally here, and all-time highs look more like a distant dream. Bitcoin (BTC) is down more than 70% from its highs, and Ethereum (ETH) is down nearly 80%, as are nearly every other token.
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The DeFi (decentralized finance) sector has also been hit hard Luna UST crashes and Exit Issues for Celsius Network – among many other things. Worst of all, it’s far from over. Raging inflation means the Federal Reserve will raise interest rates further, hitting markets further.
Among them, the total value locked in DeFi protocols (TVL) has fallen from an all-time high of $254 billion in early December 2021 to the current about $90 billion. On the surface, the situation looks catastrophic, but that’s far from the full picture. While the market is anticipating turbulence, there is plenty to be optimistic about.
In fact, upon further analysis, the decline in TVL was mainly due to a drop in market prices, rather than users exiting the agreement. For example, on a good day, About 500,000 people Daily use of the Ethereum network – That’s about the same amount as a year ago. Regardless of market volatility, DeFi projects continue to attract interest.
Furthermore, the bear market and the inevitable crypto winter have not stopped DeFi from growing. With projects such as ETH, Polkadot (DOT), Cardano (ADA), Avalanche (AVAX) planning major updates in the coming months and years, there is no doubt that DeFi is here to stay.
The industry has learned a lot, recognizing that market volatility is inevitable, not the end of cryptocurrencies. The cryptocurrency crash that happened today and the bear market of 2018 are not a repetition of the same thing.
While it is nearly impossible to accurately predict a crash, all markets move in cycles. During a bull market, speculation leads to overvaluation of projects and misinvestment, and of course, sooner or later, there will be a decline.
The last market cycle can be called the “Initial Coin Offering (ICO) era”. Crypto witnessed its first major market expansion. New projects and existing startups have taken advantage of this opportunity and started leveraging digital assets as a funding mechanism, often without providing any real underlying value.
The industry is very uncertain and filled with too many bad ICOs. After Bitcoin reached an all-time high of $20,000 in December 2017, the market crashed. Excitement quickly turned to fear.
Many ICOs failed, and overleveraged retail investors suffered. On top of that, the fear of upcoming regulations created the perfect storm for a huge market crash, with many doubting the industry will recover.
However, research into the cryptocurrency space today tells a different story. First, the blockchain industry has grown from a few functional networks to a series of interconnected ecosystems that attract millions of users every day. DeFi, non-fungible tokens (NFTs), and iGaming are booming multi-billion dollar industries, and there are more dry powders to weather the bear market.
On top of that, the market has gone from being primarily driven by retail investors to large institutions and companies like Grayscale and MicroStrategy. Crypto sponsorships are emerging in nearly every major sport, and Web 3.0 products are increasingly commercialized everywhere.
Even some countries are starting to adopt blockchain technology. El Salvador has bitcoin as its legal tender, and with the current inflation, other countries may follow the same path.