Cryptocurrencies facing challenging times
Crypto market across the globe continues to operate under pressure. There is no let off in price correction in major cryptocurrencies.
Crypto market across the globe continues to operate under pressure. There is no let off in price correction in major cryptocurrencies. After persistent fall, bitcoin is currently trading near $20,000, while Ethereum is hovering near $1,100. The crash in Terra LUNA that literally turned investments into almost nil, has shaken the faith in crypto as a digital asset. Meanwhile, the effects of the turmoil seen in cryptocurrency have started to roil the adjacent ecosystem.
Last week, leading cryptocurrency lending firm Celsius Network paused withdrawals and transfers between accounts citing 'extreme market conditions'. "We are taking this action to put Celsius in a better position to honour, over time, its withdrawal obligations," the platform said in a memo on its website.
The leading crypto lender had to take such a decision as it has been struggling to raise funds in a fragile digital-assets market that has been hit by tightening liquidity and the collapse of the Terra blockchain last month. Not only Celsius, but many others are also facing issues with regard to liquidity and trading losses.
For instance, crypto hedge fund, Three Arrows Capital suffered large losses recently. Another crypto lender, Babel Finance had also paused withdrawals like Celsius. Similarly, token holders of Solend, a lending app on the Solana blockchain, voted to temporarily take over the account of a large user facing liquidation. So, as cryptocurrencies witness a downward fall, the businesses created around these digital assets are also facing multiple issues in the form of liquidity availability, outflow of funds, exit of investors and many more.
Despite not having any regulations in place with regard to crypto assets, India has seen increasing interest among investors. Especially, crypto has emerged as one of the favourite assets for youth populace. However, when global crypto market is facing headwinds, how can India escape from such scenario? The reflections of the slowdown are already visible.
Volume in Indian cryptocurrency exchanges has dropped in recent months. Many crypto exchanges have frozen new hiring and are taking various optimisation moves. Recently, one of the largest cryptocurrency exchanges, Coinbase fired 18 per cent of its employees globally. Due to this move, around 8 per cent of Indian workforce got affected. Similarly, many NFT-led ventures are also seeing low investors' interest amid the slowdown.
This has led to VC and PE funds being more diligent in funding Web 3.0 projects. Web 3.0 has been touted as one of the most emerging areas of internet economy. This optimism has taken a backseat in recent months. Though Web 3.0 and metaverse technology are taking a beating at this point of time, they hold a lot of potential in coming years.
Though cryptocurrencies- one of the biggest use cases of blockchain technology- market is currently leading many to stay away from this emerging area, it will eventually pick up as market stabilizes. Till that happens, investors are likely to sit on the side lines. Notably, each asset class goes through various cycles and cryptos are no exceptions. Once the storm is over, the crypto ecosystem will emerge much stronger from this crisis.