Well, alrighty then. Since we wrote our last issue, the crypto market has been in a nasty tailspin. Both bitcoin (BTC) and ether (ETH) are down roughly 25% in 7 days. In fact, at the time of writing, BTC is hovering around $29k, its weakest level since July 2021.
There’s really no way around it – the markets are in pretty bad shape right now. But as always, there still is some light at the end of the tunnel.
As the macroeconomic environment continues to battle higher interest rates, almost every asset class has been struck with increased sell-side volatility. Unfortunately, bitcoin continues to be no exception to the rule. BTC continues to slide right along with U.S. equities, showing further evidence that the public views crypto very much as a risk-on asset. The proof is in the pudding too, so to speak. Since the beginning of 2022, BTC has moved inversely to traditional safe haven assets like gold.
To be frank, there is no justification for the recent losses and we’re aware that many investors have been hurt along the way. But from a fundamental stance, not much has changed.
For example, as Coin Metrics points out in their latest weekly report, BTC holders that bought over the last couple of years have resolutely kept their positions, with only 34% of total BTC supply moving in the last year. This means that 66% held for at least 1 year. In other words, the public’s faith in bitcoin hasn’t really resided despite the tumultuous market.
Furthermore, largely thanks to stablecoin, TerraUSD (UST), losing its peg (we’ll talk more about this in the Deep Dives), billions of dollars have vanished from the market over the past few days, causing widespread panic throughout crypto’s ecosystem. At the same time, however, both ETH and BTC have held up surprisingly well considering all that’s happening.
And of course, we cannot forget everything that has led us to this point in the first place…
The dollar reserve is still in decline. The inflation dragon is out of its cave. DeFi will continue to innovate at a faster pace than banks. NFTs are still unlocking digital IP. And almost every asset class across the board is in shambles as of late. Crypto Twitter can call it a “crash” all they want, but they shouldn’t forget to include just about everything else.