28Crypto Innovations must be Processed, and it Takes Time

Crypto Weekly

Crypto Innovations Must Be Processed, and it Takes Time

Risk assets are taking a hit as a result of rising inflation and the Fed raising interest rates. Crypto markets have been crashing for months due to this. The new technology is just finding its legs, according to El-Erian. "Crypto is going through what most innovations do," El-Erian told the panel in a public interview last week. El-Erian is a chief economic adviser at financial services firm Allianz, and president of Queens College at Cambridge.

A current state of overproduction and overconsumption characterizes crypto's development, according to El-Erian. A certain activity becomes more accessible because the barriers to entry are suddenly lowered.

El-Erian said he saw a lot of people entering the crypto space without understanding what it is. According to El-Erian, "They just saw prices going up and assumed they would go forever." Things are changing now. He said, "We're washing all that out. Supply and demand will be washed away. Hopefully, you can rebuild a stronger foundation, as with most innovations."

According to El-Erian, the pattern he's observing with crypto has repeated over and over again with innovations. During the steam engine, fiber optics, and even the synchronization to 2000, it occurred. "The first round isn't good," he said.

The algorithmic stablecoin TerraUSD collapsed in May, along with its sister currency Luna, and in June, crypto lender Celsius froze billions of dollars of assets. Babel Finance, another crypto lender, also halted withdrawals, and Three Arrows Capital, a crypto hedge fund, has encountered liquidity problems.

As Bitcoin fell below $20,000 for the first time since December 2020, Ether, the secondlargest cryptocurrency, fell below $1,000, its lowest price since January 2021. Bitcoin has since stabilized and risen above that mark again. Due to the downturn, Coinbase laid off 1,000 employees in June, reducing its shareholder value by $1,000.

A "crypto winter" is predicted by some crypto leaders, but it's unclear how long it will last. “Our trading revenue has declined significantly in previous crypto winters,” said Coinbase CEO Brian Armstrong in a blog post on June 14, announcing layoffs at the company. “Our business operates in any environment,” El-Erian explained. “The crash may lead to more stable industries and better technologies,” according to El-Erian.

In stocks and crypto, you will see, companies that were sustained by cheap, easy moneybut didn't have valid business prospectswill fail. But disruptive applications and technology released during a bear market will always find a market and succeed. According to El-Erian, crypto is now facing a reckoning that is part of a larger economic paradigm shift. “It's about time we get out of this artificial world of predictable massive liquidity injections, where everyone is used to zero interest rates, where we do foolish things like investing in markets we shouldn't be investing in, or investing in the economy in ways that don't make sense,” he said on CNBC's Squawk Box in mid-March.

Crypto Weekly

75,000 Bitcoin Investors No Longer Millionaires Since the Market Crashed

Last week, the Chinese newspaper, Economic Daily, warned investors about Bitcoin heading toward zero. As a result, the number of paper millionaires has declined by 75% over the past nine months. The ongoing bloodbath wreaking havoc on the crypto market has reportedly cost more than 80,000 Bitcoin investors their millionaire badges.

Just 26,284 bitcoin (BTC) addresses currently contain holdings valued at over $1 million, with Bitcoin’s price barely holding around $20,000. As reported by BitInfoCharts, 108,886 BTC addresses reported a balance greater than $1 million on November 12th, 2021, just days after Bitcoin hit a new alltime high of around $68,000. According to Cointelegraph, the number of paper millionaires has declined by more than 75% over the last nine months.

It has also affected the number of whales with a Bitcoin wallet worth over $10 million due to the dramatic decline in Bitcoin's price. In November last year, 10,587 addresses had a minimum cash value of $10 million, but yesterday, only 4,342 held that stature - a 58% drop. Over 13,000 new "wholecoiners,” or wallets containing one or more Bitcoins, have been added to the market despite the decline in the net worth of former Bitcoin millionaires. According to the report, there are now just over 860,000 wholecoiners. Based on this spike in wholecoins, retail investors continue accumulating large amounts of BTC as prices tank.

During the past 20 days, more than 250,000 addresses have added more than $2,000 to their holdings, according to data from Glassnode. This adds further credibility to the retail accumulation narrative.

Crypto Market Impacts

The report stated that Bitcoin and the rest of the digital asset market had been negatively impacted by several issues, including increased regulatory scrutiny, sustained geopolitical unrest, rising inflation, and interest rate hikes.

With global markets increasingly uncertain, commentators believe that risk assets like Bitcoin could continue to suffer for longer. Chinese state-run newspaper Economic Daily warned investors last week that Bitcoin was heading toward zero. "The returns of Bitcoin come primarily from buying low and selling high, as it is merely a series of numbers," the newspaper explained.

"Bitcoin's value will return to its original value in the future when investors' confidence collapses, or sovereign countries declare it illegal," the report added.