Bitcoin was dubbed the future of finance when it took the world by storm. Ever since its inception, it has attracted huge attention because of the anonymity crypto tech provides. While Bitcoin became the face of all cryptocurrencies, it also became the standard lens to see the whole industry with. As a rule of thumb, if bitcoin is falling, then investor confidence in other cryptos also takes a fall. 

These digital currencies are known for their volatility, but for a brief period of time, they were the new goldmine. Everyone was trading in crypto and its tokens, and it seemed like there would be no end to the party. However, nothing could be further from the truth. What the scene from 2021 turned out to be was just the peak for crypto.

We’ve recently seen the FTX fiasco, in the wake of which the company’s founder and former CEO, Sam Bankman-Fried, admitted that he “f–ked up,” in a tweet.

With cryptocurrencies proving to be just another financial bubble that could lead to situations with the likes of the dot-com crises or the infamous 2008 housing crisis, many investors are becoming cautious about where to put their money for increasing returns. The stock market is highly competitive, and seeing satisfying returns on your investment might take up to a few years to manifest.

That being said, cryptocurrency is still used for millions of transactions every day. The casino industry is especially taking huge advantage of this. Gambling platforms like SlotsLV offer crypto transactions via digital wallets, which allow users to wager money using cryptocurrencies like Bitcoin, Ethereum, Litecoin, and many more, as you can see here: https://www.slots.lv/. This certainly adds to the potential of mass adoption in the cryptocurrency space.

The crypto industry’s once $3 trillion value has now gone down to merely $900 million

It’s been almost a year since Bitcoin was valued at around $68,000. Now, it’s down to somewhere around $24,000 as of this writing. Furthermore, a report from CNBC reveals that while the whole cryptocurrency industry was valued at $3 trillion during its high days, it’s now down to a sorry $900 million.

Many hoped that bitcoin would face a constant rise in its value, and become a stable token of confidence for investors. That would have aided the U.S. economy in staving off inflation as a new gold standard would have emerged. Sadly, it’s turned out to be highly volatile in nature which is susceptible to impulsive investors pouring in money and rushing away from it when things get tough.

How did the crypto collapse start?

It all started in late 2021 when the spiking inflation rates alarmed the U.S. Federal Reserve. When Bitcoin saw a 19% fall in its value in December, it was due to investors rushing off to store their money in safer assets.

This continued until January, with Bitcoin seeing a fall of 17% and Ethereum steeply losing 26% in value. David Marcus, former crypto head of Meta, said in a tweet in January 2022 that “crypto winters” result in the best of entrepreneurs who focus on real problems solving than “pumping tokens.”

The fall in Stablecoin’s value further increased the lack of confidence in crypto holders. A stablecoin functions to maintain a $1 valuation against the U.S. dollar so that investors could derive value in the real world instead of potentially losing out to the volatility that comes with other digital currencies.

Stablecoin sank below the $1 point, which was similar to a nuclear meltdown for the crypto markets. Suddenly, no amount of digital currencies was safe to own, and just like that, more than $40 billion were evaporated.

Bitcoin fell 16% in the following week and was around the half-value mark from what it held at its peak. It led to a further spike in inflation, which led to the central bank keeping the rates rising to slow down the increase in consumer prices.

Withdrawals from Binance, Celsius halted

In June, Celsius halted withdrawals in the wake of “extreme market conditions.” The same happened with Binance, and the crypto lending firm BlockFi, which had bulked up its workforce four times than it used to be, let go of 20% of its employees.

The downfall of many crypto hedge funds also followed with Three Arrows Capital, Voyager Digital, and more. FTX’s Bankman-Fried bought the tanking crypto companies such as BlockFi at a fraction of its valuation, and in the process created the illusion that he was saving the industry. Sadly, it ended with his downfall.

The collapse of FTX

Binance CEO Changpeng Zhao tweeted that the company was selling whatever remaining FTT tokens they owned. FTT was the prime currency of FTX, and his tweet criticized the company for lobbying against other crypto players. An article from CoinDesk further plummeted confidence against FTX, as the report showed that Bankman-Fried’s own hedge fund, Alameda Research, held extraordinary amounts of FTT.

FTX’s fate, later on, is no mystery. The company’s $32 billion valuation evaporated, and customers wanted withdrawals. Furthermore, Binance’s public dissolution with FTX set up the company for imminent collapse.

Cryptocurrencies are always fluctuating. It only goes to show that without a mediator body looking out for the participants in a system such as the Federal Reserve Board, or the likes of protections on an institutional level, investor confidence will always be shaky.