By Marcus Sotiriou, Analyst at the UK based digital asset broker GlobalBlock
Global markets took a catastrophic hit yesterday, as the Nasdaq was down 4.60% and the S&P 500 was down 3.88%. Crypto suffered the most, as Bitcoin dropped over 20% to reach a low of $20,800. Ever since the crypto rally in November, in response to Bitcoin ETF Futures product being launched, crypto has been on a ruthless downtrend with little sign of relief. Bitcoin has correlated with the Nasdaq very tightly this year, and actually performed better up until May. When UST and LUNA collapsed last month, which had a combined value of around $100 billion, this commenced a downward spiral which exacerbated cryptos decline against the Nasdaq.
The market remains justifiably fearful of the potential impacts of Celsius becoming insolvent, whilst still having billions of assets under management. The decline in their assets under management has been remarkable, falling from $28 billion in November to around $3 billion today.
I think Celsius’s liquidity issues raises serious concerns about high yields on many lending platforms, and crypto critics will feel more confident in their views around the legitimacy of DeFi. I agree that people should be cautious with lending firms offering lucrative yields of double-digits on assets like Bitcoin and Ethereum. People should consider the risks involved like smart contract exploits, lenders becoming insolvent and whether the protocol has been stress tested. We are still in the early phase of crypto, where many DeFi products are being tested and selectivity will result in many failing along the way.
We are seeing impacts across the board of centralised lenders, as BlockFi is also facing problems too. They announced in a blog post today that it is letting go of 170-200 employees, which is 20% of the lender’s total staff headcount.
This follows a string of established crypto companies decreasing employee numbers, because of the ongoing chaos happening in this market downturn. Crypto.com CEO, Kris Marszalek, said on Friday that the company is laying off around 260 employees.
However, unfortunate events with lenders like Celsius and other crypto firms will not prevent savvy investors from investing directly into mainstream cryptocurrencies. The intrinsic value of borderless, permissionless and blockchain-native assets will continue to thrive in the long term.
Image and article originally from www.the-blockchain.com. Read the original article here.