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What’s next after the crypto market crash?

Crypto is experiencing one of the most severe markets crashes the industry has ever seen.

Since the top of last year’s bull run, the most popular crypto assets, such as bitcoin and ether, have plunged by nearly 70%, while the industry itself has shrunk from more than $3 trillion to less than $1 trillion.

Crypto is not the only asset class affected by the larger macroeconomic climate. Still, the decline in digital asset values has decimated a slew of once-established sector actors, including lenders, stablecoin issuers, and retail and institutional investors.

Crypto has had a really poor year, with bitcoin’s 70% price drop placing it in better health than many of the other top ten cryptocurrencies, which are down 75% to 90%.

It puts them in the same situation as many companies in the payments and purchase now, pay later industries, whose share prices have similarly plummeted in the last year. The price crash of cryptocurrency is much easier to comprehend. In a downturn, a product whose fundamental value proposition is at best years away is more difficult to sell.

That’s the problem. While simple blockchain applications are expanding, and there are indicators that big finance is using decentralized finance technologies, there isn’t much there yet.

How does a major crypto lender collapse?

No one was surprised when Celsius declared bankruptcy this week. When a platform freezes a customer’s assets, it’s usually game over. But just because this troubled crypto lender’s collapse was unexpected doesn’t mean it wasn’t significant for the sector.

CEO Alex Mashinsky stated in October 2021 that the crypto lender has under management $25 billion in assets. Despite falling bitcoin values, the lender managed around $11.8 billion in assets as recently as May. Another $8 billion in client loans made the firm one of the world’s top brands in crypto financing.

In its terms and conditions, Celsius states that each digital asset transferred to the platform constitutes a loan from the user to Celsius. Because Celsius provided no collateral, user monies were unsecured loans to the platform.

Voyager Digital, which has 3.5 million members and recently filed for bankruptcy, is another major lending platform catering to retail investors with high-yield offerings.

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