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A Recap of the Biggest Crypto Stories of the Summer

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The crypto space has been on a wild and difficult ride over the summer and headlines haven’t been kind, reflecting the downturn. There have been collapses, layoffs, assets frozen and steep declines.

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Amid the doom and gloom and some investors having turned their backs on the space, bulls will remain bulls: MicroStrategy’s Michael Saylor tweeted, “You can worry or you can #bitcoin.”

There is also some uplifting news, notably with the excitement surrounding the upcoming Ethereum Merge, slated for September.

Let’s take a look at some of the biggest stories of the season.

Terra collapse

Stablecoin TerraUSD (UST) crashed in May, prompting regulators to renew calls for crypto legislation.

Stablecoins are cryptocurrencies whose aims are to remain stable and have low volatility. They can be pegged to a currency or a commodity such as gold.

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Terra, a so-called algorithmic stablecoin, was pegged to the dollar and could be used in conjunction with LUNA, Terra’s non-stablecoin crypto, or as a standalone token, according to CoinMarketCap.

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“Stablecoins are only valuable to users if they maintain their price peg,” according to Terra’s website. “The Terra protocol uses the basic market forces of supply and demand to maintain the price of Terra.”

The collapse of Terra and the loss of more than $50 billion in values of the Luna and UST coins over a three-day period created a domino effect and immediate issues for many market participants, leading to the eventual “cryptopocalypse,” and “many of these market participants had to halt operations, limit withdrawals or take emergency bailout loans to survive,” according to Celsius’ bankruptcy filing.

Yaoqi Jia, founder and CEO of AltLayer, an execution layer for blockchain applications that is building a pay-as-you-go network for emerging Web3 projects, told GOBankingRates, “People need to remember that we are in the early phases of building out this decentralized technology, and the industry could probably do a better job at highlighting the potential risks involved in these emergent networks.

“That said, an algorithmic stablecoin is one of the most complicated technological feats to pull off, and a lot of crypto observers were warning early on about the risks with Terra and its algorithmic system. In the future, we should heed these voices of caution more.”

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The Great Collapses and Ensuing Cryptopocalypse

This summer also saw the collapse of several crypto platforms, which has left investors frustrated and regulators anxious to regulate.

Crypto lending platforms Voyager Digital and Celsius promised eye-popping yields to their customers — that is, until they both filed for bankruptcy in early July due to their exposure to the now infamous Three Arrows Capital, which itself went bankrupt after the implosion of Terra LUNA and its TerraUSD (UST) stablecoin.

In its bankruptcy filing, Voyager said it provides loans, “typically in the form of a specific type of cryptocurrency, to counterparties in the cryptocurrency sector to facilitate liquidity or trade settlement — and interest earned from the company’s loans is passed along to customers, who earn a yield on their stored cryptocurrency.”

Celsius, which had a similar model, said in its bankruptcy filing that “these Chapter 11 cases will provide a breathing spell for the debtors to negotiate and implement a plan that will maximize the value of its business and generate meaningful recoveries to our stakeholders as quickly as possible.”

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According to the court filing, Celsius has a $1.2 billion deficit on its balance sheet and owes users $4.7 billion. The company says it has $167 million in cash on hand, “which will provide ample liquidity to support certain operations during the restructuring process.” 

Jia noted that many of these bankruptcies and insolvencies affected centralized lending platforms.

“That’s not to say this kind of issue didn’t impact DeFi protocols — it certainly did, to some extent — but there’s a common theme among the affected centralized lenders,” Jia added. “That theme is that they are — or, in this case, were — far more opaque than the DeFi lenders in terms of their operations and risk-taking.

“If anything, these incidents should be a rallying call for our industry to promote the transparency and auditability of decentralized lending platforms. The latter is a key benefit provided by our industry, and we should work to continue building out DeFi for mainstream adoption.”

Layoffs

It also has been the summer of layoffs in the crypto space.

In June, Coinbase announced it was laying off 18% of its staff “to ensure we stay healthy during this economic downturn,” as it appears “we are entering in a recession” and the company “grew too quickly.”

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In a memo to employees posted on its website, CEO Brian Armstrong said, “The buck stops with me.”

He explained that economic conditions are changing rapidly and that “we appear to be entering a recession after a 10-year economic boom.”

Also in June, Gemini, run by twins Cameron and Tyler Winklevoss, announced it would slash the company’s workforce by 10%.

In August, Robinhood announced it was laying off 23% of its staff, following the 9% it laid off in April. In a blog post, CEO Vlad Tenev said the newest round was due to the “additional deterioration of the macro environment, with inflation at 40-year highs accompanied by a broad crypto market crash, which has further reduced customer trading activity and assets under custody.”

Patrick Chiu, founder and CEO of global digital asset financial services group Mamoru, told GOBankingRates, “The crypto industry is no stranger to bear markets, like we seem to be experiencing right now.”

Chiu added that his company is growing and taking advantage of this slow period in the market to “be positioned well for when the market does turn around.”

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BTC below $20K

It has been a brutal ride for Bitcoin in the past few months, even though mega bull Michael Saylor still believes “Bitcoin is a miracle happening right before our eyes,” according to an Aug. 31 tweet.

On Aug. 31, Bitcoin was hovering around $20,225, down 70.5% from its all time-high of $69,044, reached on Nov. 10, 2021, according to CoinGecko.

The asset dipped below $20,000 following Fed Chairman Jerome Powell’s annual policy speech.

Simon Peters, eToro market analyst, said, “This downturn after (Powell’s speech) mirrored the equities market, with $1.25 trillion lost in U.S. markets following comments that interest rates hikes are here to stay. At one stage on Monday, BTC fell under $20,000 to trade at just over $19,500. But (it) has recovered since.”

But bulls will remain bulls and, despite the extreme volatility Bitcoin has experienced many times in its short history, Bruce Fenton said he’s “bullish on Bitcoin and its certainty and dependability in an uncertain world.”

Fenton, founder and CEO of Chainstone Labs and co-founder of Bitcoin Association, added: “Bitcoin has a fixed supply in an economic environment with fiat money with an unlimited supply.”  

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The sentiment was echoed by Jia, who added, “Look, Bitcoin is growing at an exponential rate. And with any exponential technology, the tradeoff is volatility. If you’re in this industry for the long haul, then volatility should not be feared.

“That said, I think going forward we should be wary as an industry of making overly optimistic price predictions. It’s better to stay humble and focus on building and making Bitcoin and crypto easier to access for more and more people around the world.”

The Upcoming Merge

The Merge, the much-anticipated Ethereum upgrade, is set to take place in September, in what many experts call “one of the most significant moments in the history of crypto.”

Simply put, The Merge is the end of proof-of-work for Ethereum and the full transition to proof-of-stake, according to the Ethereum Foundation.

“The Merge represents the joining of the existing execution layer of Ethereum (the Mainnet we use today) with its new proof-of-stake consensus layer, the Beacon Chain,” the Ethereum Foundation stated. “It eliminates the need for energy-intensive mining and instead secures the network using staked ETH.”

“It’s the most exciting narrative in crypto right now,” Mamoru’s Chiu said, “and I am looking forward to the upgraded Ethereum.

“I think it will help facilitate the growth of Web3 as a stepping stone to reaching full scalability. I think that The Merge will set the foundations for eventually making Ethereum far faster, cheaper and energy efficient.”

NFTs Prices Drop

After an explosive growth, the NFT space has been slowing down over the summer.

“NFT volumes and floor prices have dropped off the face of the Earth in 2022,” said Amanda Tan, marketing director at Alpha Impact. “The only area that saw any growth is the number of NFT mints on Solana, the beleaguered blockchain that aims to compete with Ethereum.

“Despite this,” she said, “total NFT sales as well as the weekly trading volume for NFTs stands down, with trading volume last week hovering around $35 million. This is a stark contrast to the more than $1 billion transacted in the first week of January 2022. Our traders are watching to see if the halving in 2024 will drive further NFT volumes as we head into 2023.”

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