In the crypto world, only the strongest survive, says Celia Zeng, DeFi asset manager at capital.
This week, a major cryptocurrency, said to be pegged to national currencies such as the US dollar, has fallen in value. Volatility has been the buzzword for the crypto industry for the last few months. The short-term factors have overshadowed the long-term expectations. This leads to an optimization between the main actors and instruments. Survival of the fittest further strengthens the industry by eliminating unreliable or unethical participants.
Cryptocurrencies hit their annual lowest levels in January and February 2022. This was followed by a rise in March and a fall in April and May. In the sub-sector of NFTs, prices and liquidity have fallen and the number of users has also fallen markedly. On the other hand, well-known names have increased their presence from a legal and practical point of view.
Crypto-industry: Rise in adoption
The Metaverse sector, represented by Decentraland (MANA), Sandbox (SAND) and Axie Infinity (AXS), delivered an excellent performance in February with an annual return of 1851%. BTC and ETH also managed to improve their performance in February and March before crashing again in April. The role of the largest cryptocurrencies as a safe haven further strengthened market leaders.
Curve, MakerDAO and Lido Finance maintained their top 3 positions among DeFi protocols based on Total Value Locked (TVL). Lido Finance remains among the most undervalued protocols based on the relationship between market value and TVL. The DeFi sector, while experiencing sales, continued to outperform traditional cryptocurrencies.
The entry of the largest companies into the crypto sector has become more and more apparent. McDonald’s has filed at least ten trademark applications as a result of its Metaverse plans. JPMorgan became the first bank in Metaverse with the opening of the Onyx Lounge in Decentraland. Super Bowl LVI tickets included NFTs in memory. The presence of companies in the crypto industry means a broad user base and a more significant capital inflow as demand increases.
GameFi is also trendy. Some tech giants like Facebook have already shown their intentions to become part of Metaverse and the gaming sector. Traditional gaming platforms like UniSoft plan to integrate blockchain technology into their business and technical models, including the use of NFTs. The NFT market was around $ 25 billion in 2021. This year, it is expected to reach $ 35 billion in net sales. Based on the current growth rate, observers predict that the NFT market will grow by $ 80 billion by 2025.
The legal aspect of the crypto industry already showed signs of volatility. The SEC opened an investigation into the Mirror Protocol, which allows trading in synthetic versions of popular U.S. stocks.
The commission even issued subpoenas to the CEO of Terraform Labs after the U.S. District Court ordered compliance. The global crypto community has averted an attempt by the EU and the European Parliament to block or restrict assets for proof of work through their Crypto Assets (MiCa) Bill, namely 61 (9c). The Ukrainian parliament passed the bill on the legalization of cryptocurrencies in February. In March, he was signed by Volodymyr Zelensky.
investments and venture capital
The investment community saw the temporary decline in the market value of the crypto-industry as a solid investment opportunity. Capital investment in the blockchain and crypto industry reached $ 14.6 billion in the first quarter of 2022. That is almost half of the $ 30.5 billion invested throughout 2021. The early adoption phase of the industry continued to present a broad range of investment opportunities. In addition, some saw the cryptocurrencies as a defensive asset against rapidly rising inflation in dollar prices.
The largest investments: Sequoia Capital and Paradigm invested $ 1.15 billion in Citadel Securities. This was the largest trade in Q1 2022 in the crypto industry. The transaction marks a shift from Citadel Securities to new asset classes, including crypto. Cross River made a $ 620 million investment in crypto solutions.
Mergers and acquisitions: Some of the largest mergers and acquisitions in the crypto industry include Silvergate Capital’s acquisition of Diem in January, Fireblock’s acquisition of First Digital Trust in February and Blockchain.com’s acquisition of Altonmy in March. The Web3 sector has attracted the largest share of investments and accounted for 26.5% of the total amount in Q1 2022.
Sustainable Development: The crypto industry has also shown how it can contribute to good causes. Decentralized autonomous organizations are stepping up their involvement in the midst of Russia’s war against Ukraine. Ukraine DAO alone has raised $ 6.75 million in favor of Ukraine through the sale of NFT. The crypto fund set up by Ukraine’s Ministry of Digital Transformation has raised over $ 60 million. These examples show how the crypto industry removes obstacles and bureaucratic obstacles for a good cause.
Risks and hacker attacks
Like any other company or bank, the crypto industry is vulnerable to hacking. They uncover networks and exchange vulnerabilities through reentrancy attacks, direct hacks, or the use of other tools. The good news is that each event strengthens those involved and the industry as a whole. Vulnerabilities have been eliminated and the back door closed for future hacking attempts.
The victims of the most recent attack in March-May 2022 include Agave DAO, Cashio, Revest Finance, Ronin Network, Voltage Finance, Inverse Finance, Elephant Money and Beanstalk. The attacks usually result in losses in the millions. Of the $ 181 million stolen from Beanstalk, the attackers managed to keep $ 76 million.
The crypto industry: what does the future hold?
The basic data point to future growth in the crypto industry. The temporary short-term volatility provides investment opportunities and a good basis for mergers and acquisitions. Our tip is “BUIDL” (Build Useful Stuff): Build strong infrastructures and invest in credible projects. This avoids the risk of profits being lost during the downturn cycle and encourages new capital flows into the industry.
About the author
Celia Zeng is the DeFi asset manager at Cabital. Cabital simplifies investing in the crypto world without all the noise and drama that comes with it.
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