What’s the catalyst behind the crypto crash?
![](data:image/svg+xml;charset=utf-8,<svg height="768" width="1024" xmlns="http://www.w3.org/2000/svg" version="1.1"/>)
Image Credits: Nigel Sussman
The web3 market is a mess.
There’s enough going on that it will take us a moment to unpack the situation this morning, but leading indicators of sentiment in the blockchain ecosystem are sufficiently nasty to set the stage: Bitcoin is off around 13% in the last 24 hours to $23,436; ETH is off around 15% over the same time frame to $1,219; Solana’s token is off approximately 15% in the last day to $26.75.
The three tokens are down roughly 26%, 36% and 39%, respectively, over the last week.
The Exchange explores startups, markets and money.
Read it every morning on TechCrunch+ or get The Exchange newsletter every Saturday.
The biggest driver of concern this morning appears to be a crisis at Celsius Networks, which raised a huge chunk of venture capital last year, and today halted withdrawals after its token crashed.
This doesn’t mean that there is no money flowing in the startup world — even some less tech-focused ideas are busy raising big checks, as TechCrunch noted earlier today. But what’s going on in the blockchain domain? Let’s take a minute to explore that question from a few angles.
What the heck is going on?
While I am not the TechCrunch+ crypto expert — that mantle belongs to recent hire Jacquelyn Melinek — I have put together a list of issues that are currently tripping up the web3 market, which is inclusive of everything from cryptocurrencies and decentralized finance to non-fungible tokens. They are, loosely:
- Trading volumes are declining: After hitting a peak of $2.23 trillion in May 2021, crypto exchange trading volumes fell below the $1 trillion-per-month mark at the start of 2022. After recovering in May, June is on track to record what could be the lowest amount of trading activity since December 2020.
- Component to that is a decline in enthusiasm for on-chain assets: The most popular blockchain for NFTs (Ethereum) and the most popular NFT marketplace (OpenSea) are seeing falling activity levels, and the trend appears to be gaining pace. May was not that bad of a month, though that fact was driven more by the Otherdeed sale than anything else.
- At the same time, another former bright spot in web3 — DeFi — is falling apart: Decentralized finance has had a rough year. The Terra/Luna collapse was a body blow, and since then, the erosion and recent freezing of the Celsius Network have only added to the mess. After peaking at more than $250 billion, the total value locked (TVL) in DeFi has declined to $83.8 billion this morning, off around 11% in the last 24 hours.
- One result is more layoffs: Crypto.com is laying off staff. Coinbase is yanking offers and freezing hires. Gemini has laid off employees. The market for crypto talent has shifted rapidly and sharply. As recently as February, Coinbase was publicly stating that it was going to hire “up to 2,000 employees across [its] Product, Engineering, and Design teams.” That has flipped into a hiring freeze. Layoffs are a trailing indicator of performance, mind, which tells us that the crypto market has been in a downturn for longer than we might have thought.
- This won’t rectify anytime soon, even without another crisis: Given that the crypto markets operate in part on community excitement, the downturn could persist for a long time even if nothing else goes wrong. Binance freezing bitcoin withdrawals this morning isn’t a good look, nor is Tether falling under its peg — again — not to mention the ongoing issues at Celsius.
These are worrying signals, and it would be an aggressive wager to suggest another major piece of the blockchain world won’t snap in the coming days. If something else happens, we’ll have even more winter ahead of us.
That, I think, is a reasonable overview of where things are today. Note that as recently as May, investors were still busy writing checks for web3 companies, albeit at a slightly slower rate. As we reported earlier this month:
Total venture capital funding in the crypto space fell 38% from $6.829 billion in April to $4.219 billion in May, according to Dove Metrics data. Even though the amount of capital deployed into crypto is down in the short term, it’s significantly higher than levels from a year ago: The amount of capital invested in the space last month increased 89% from $2.233 billion in May 2021.
It seems likely, then, that crypto venture funding will not look too poorly this month compared to a year earlier, indicating that investors have not lost faith. However, we do wonder what July might bring.
![](data:image/svg+xml;charset=utf-8,<svg height="104" width="187" xmlns="http://www.w3.org/2000/svg" version="1.1"/>)
![](data:image/svg+xml;charset=utf-8,<svg height="105" width="187" xmlns="http://www.w3.org/2000/svg" version="1.1"/>)
![](data:image/svg+xml;charset=utf-8,<svg height="125" width="187" xmlns="http://www.w3.org/2000/svg" version="1.1"/>)
![](data:image/svg+xml;charset=utf-8,<svg height="140" width="187" xmlns="http://www.w3.org/2000/svg" version="1.1"/>)
