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Crypto Recap Q2 2022

tl;dr Summary: To say that the second quarter of 2022 was a volatile quarter would probably be an understatement. The economy officially entered a bear market and crypto was definitely no exception. The total crypto market cap dropped below $1T from its $3T record in November 2021 and most coins from meme to mainstream are down over 50%. 

Quick Summary

The crypto market experienced one of its worst quarters in history. The overall crypto market cap fell by over 50% during the quarter dropping below a $1T market cap. This stands in stark contrast with their record high $3T market cap set in November of 2021. DeFi was particularly challenged this quarter and saw Total Value Locked reach 12 month lows of $89 billion compared to $154 billion at the end of July 2021. 

Despite these challenges, venture capital continued to pour money into the space, totalling over $15 billion into Web3, blockchain, and crypto related startups. Firms such as Andreessen Horowitz and Sequoia Capital continue to remain bullish on the potential innovations that these new technologies can bring. Collectively, the two firms launched over $5 billion in fresh capital across two new funds to help further lean into this bet.

While there are many details and stats that we could highlight about crypto and Web3 this quarter, the myriad of news that help to contextualize these stats will be the focus of this article. To that end, below is a quick pick of some of the most captivating events that happened during this volatile quarter.

Terra’s LUNA, the top-10 cryptocurrency, and UST, the top-3 stablecoin, have evaporated and are now worthless.

Several DeFi projects are nearly (or are) dead.

Tier 1 venture firm Three Arrows Capital has filed for bankruptcy.

Traditional financial markets are in trouble with rising inflation and increasing rates.

Despite all the bad news, there are several important fundamental factors.

Biggest Wins

  • The early part of Q2 2022 saw record valuations for crypto start-ups
  • Ethereum is set to complete its highly anticipated Merge by the end of 2022
  • Coinbase became the first crypto startup to join the Fortune 500
  • Bored Ape’s Otherside drove so much traffic to Ethereum that it briefly crashed it
  • Crypto provided an alternative way for donations to reach Ukraine
  • Solana overtook Ethereum in daily NFT trading volume
  • Despite market challenges, Binance, Polygon, and few select layer-2 solutions increased hiring
  • JPMorgan considered tokenizing trillions of dollars worth of traditional assets
  • Binance offered zero-fee bitcoin trading
  • FTX US launched stock trading

Biggest Fails

  • Coinbase’s NFT marketplace got less than 150 users on its opening debut
  • UST and LUNA crashed
  • Bored Ape Yacht Club was hacked
  • Bitcoin hit its lowest price since 2020
  • MicroStrategy, a company famous for owning the most bitcoin of any publicly-traded company, is reportedly down over $1 billion
  • Gemini, Coinbase, and many other crypto companies announced considerable layoffs
  • Three Arrows Capital became insolvent and declares bankruptcy
  • Bitcoin mining revenues fell over 20%
  • Celsius, Babel Finance, and other crypto lenders limited or restricted accounts from withdrawing money
  • Hackers stole from Horizon, Axie Infinity, and more
  • Tether, USDD, and other stablecoins had their $1 peg tested
  • Wikipedia stopped accepting Bitcoin and Ethereum donations

Adoption Everywhere

  • Robinhood rolled out crypto wallet and used Lightning Network for bitcoin transactions 
  • Intel launched a new sustainability-focused crypto mining chip
  • BlackRock launched ETF with crypto exposure
  • Samsung and Nifty Gateway partnered to bring NFTs to smart TVs
  • Gucci, Chipotle, Equinox, and others began to accept crypto in stores
  • Meta announced Instagram NFT plans
  • Citadel announced plans for a crypto trading platform

No More Mister Nice NFT

  • OpenSea teased Solana NFT integration 
  • Solana’s network was inundated by NFT demand 
  • Gucci joined its first DAO 
  • Celebrities like Cristiano Ronaldo signed NFT sponsorships and partnerships
  • Fashion brands like Louis Vuitton and Prada launched their own NFTs
  • Salesforce launched NFT cloud where users could mint and sell NFTs as part of their SaaS offering

The Gaming Corner

  • Axie Infinity lost $600M in a hack
  • Ledger bought land in The Sandbox 
  • Illuvium sold $72M+ in digital land 
  • Move-to-Earn project Stepn hit with DDOS attacks

Government in Action

  • India enacted strict crypto tax laws
  • US Treasury applied its first crypto sanction against Russia 
  • US Government illustrated concerns on crypto’s energy use
  • US lawmakers proposed stablecoin regulation 
  • El Salvador went all in on Bitcoin and bought the dip multiple times
  • Argentina’s central bank banned crypto trading
  • Central African Republic adopted bitcoin as legal tender
  • EU and Japan passed crypto regulation frameworks
  • SEC recommended holding digital assets on exchange’s balance sheets
  • Biden Administration proposed crypto exchange and broker reporting requirements

The Wacky World of Web3:

  • Decentralized Pictures received grant from Steven Soderbergh
  • Binance announced partnership with the Grammy Awards
  • Sotheby’s conducted NFT auction 
  • Blockchain.com closed sponsorship with Dallas Cowboys 

On the Horizon:

While this is by no means a comprehensive list, hopefully it gave you a quick snapshot on how active and diverse the activity in Web3 has been. Q3 of 2022 is shaking out to be a critical moment for crypto and blockchain technology. On one hand, we have a slowdown in both the wider economy and crypto, but on the other, we have a myriad of venture-backed projects that are ready to burst onto the scene.

In a16z’s recent “State of Crypto” report, they stated the cycle of innovation that crypto follows: when the crypto market goes up it attracts innovative talent. And with that talent, comes interesting technology that restimulates intrigue and valuation of crypto. As we monitor crypto over the next few months, we will look for innovations that reinvigorate that intrigue and excitement for the space. 

Author

  • Willy is Venture Capitalist focused on emerging technology. When he isn't reading up on cool companies you can find him learning to pole dance.

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