By Marcus Soterio, analyst UK based digital asset broker GlobalBlock
Global markets were hit hard yesterday, with the Nasdaq down 4.60% and the S&P 500 down 3.88%. Crypto was hit hard as Bitcoin fell more than 20% to hit a low of $20,800. Since the crypto rally in November, in response to the launch of the Bitcoin ETF Futures product, crypto has been on a merciless downtrend with little sign of relief. Bitcoin has been strongly correlated with the Nasdaq this year, and has outperformed through May. When UST and LUNA, worth a total of nearly $100 billion, crashed last month, it started a downward spiral that exacerbated the fall of cryptos on the Nasdaq.
While the market still has billions of assets under management, it is reasonable to fear the effects of Celsius. The decline in their assets under management is impressive, down from $28 billion in November to $3 billion.
I think the Celsius liquidity issues will raise concerns about the 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 wary of lending firms offering double-digit profit margins on assets like Bitcoin and Ethereum. People need to consider risks such as smart contract exploitation, creditors being sued, and whether the protocol is stress tested. We are still in the early stages of crypto, with many DeFi products being tested and choices leading to many failures along the way.
BlockFi is also experiencing problems, so we are seeing impacts on the Central Board of Creditors. They announced in a blog post today that they are laying off 170-200 employees, which is about 20% of the lender’s total workforce.
Due to the chaos that is occurring in this market crash, the number of employees of these established crypto companies will decrease. Crypto.com CEO Chris Marszalek said on Friday that the company is laying off about 260 employees.
However, unfortunate incidents with lenders like Celsius and other crypto companies have not deterred savvy investors from investing directly into major cryptocurrencies. The intrinsic value of borderless, permissionless and blockchain-native assets will continue to grow in the long term.