Crypto has been experiencing downtime for at least two quarters of the year, the market started at a high pace, and the plunge was as brutal as the height of its success.
Crypto is generally a volatile market, so the crash may not have been entirely unexpected, but no one could have predicted how bad it got and has continued to be. Many cryptocurrencies like Ethereum, Solana, Near, and Bitcoin started the year and went through Q1 at the peak of success, but the plunge was swift.
It has left many wondering what could be causing the downtime in cryptocurrency and how its volatility would affect every other aspect of the Web 3 ecosystem. Would NFTs take a hit? How does this affect GameFi?
The Cause Of The Crypto Downtime
The downtime the crypto industry is currently experiencing could be attributed to the world finally leaving the pandemic phase. During the shutdown, there was an influx of people into the blockchain industry, with more people choosing to invest in it as the world was shutting down and people picked up on different aspects of the web three industry. Could it be that as we leave the pandemic phase entirely, the aftermath is putting a strain on cryptocurrency? While this isn’t a definite pointer on what’s going on, it cannot be denied that something is having a substantial disastrous effect on the cryptocurrency ecosystem.
One of the significant appeals cryptocurrencies had was that they were known to be insulated from the effects of inflation. At the same time, the value of other currencies suffered during times of overheated economies. Cryptocurrencies were expected and known to remain steadfast. This helped maintain the stance that cryptocurrency had the same mode of classic inflation hedges as gold. The reality, however, hit when significant cryptocurrencies like Bitcoin and Ethereum stopped functioning successfully in Q2 of 2022. The inflation hit continues to climb, preventing their value from being held steadily.
The reason for this could be the severity of the economic overheating the society has been going through.
While cryptocurrencies like Bitcoin and Ethereum have long been seen by their enthusiasts as alternatives to the stock market, there has been somewhat of a nuance in reality as the two investment opportunities have become increasingly similar. The tumbles the stock market experience are now usually a foretell commensurate or a worse turn in the price of the cryptocurrency. A part of this could be traced to people beginning to view cryptocurrencies through the lens they view technology stocks as high-risk and high rewards investments that might not be the best path during times of instability.
The Wars Around The World.
It is a known fact that in times of war and uncertainty, people rush toward investing in things that would protect their assets and financial security when they are finally stable. These days, cryptocurrencies are not one of those assets, as they are not affected and shaken by catastrophic happenings worldwide.
How would The Downtime Of Cryptocurrencies Affect Web 3?
While cryptocurrency is experiencing significant downtime, for Web 3, innovations have not faltered. There have been records of healthy growth for Web 3, with innovations continuing to take place even with how disappointing the price trajectory has been for crypto enthusiasts.
For NFTs, this is a sad time as the prices of cryptocurrencies heavily influence Nft trades as the prices continue to crash alongside crypto. The sales of NFTS have dropped by half, with their worth being pulled along in the plunge.
It could also affect Web 3 games and apps, especially ones that involve owning NFT collections and wallets. Still, the crash did not hit them as hard as it hit other aspects of Web 3, and they might even have a chance at turning it around and using it as a way to start again on a clean slate.
The blockchain industry is involved in almost every aspect of Web 3, so it is not unexpected that its crash would affect the ecosystem.
This is, however, not the first time in the history of cryptocurrency that there has been downtime, with the market seeing a pull BSC this obvious. 2015, 2018, and the pandemic’s beginning had huge plunges in crypto. The market has had its share of victories and failures, but with each pullback, the technology has evolved even further, and the growth has been excellent each time.
There is no doubt that the crypto market will come back stronger.