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Bitcoin and Ether prices don’t move quickly, but the crypto and NFT sector certainly does
Cryptocurrency advocates have been fighting for years to make their emerging technology mainstream. Now, the crypto sector is in the spotlight for all the wrong reasons.
Controversial cryptocurrency lending company Celsius Network, which froze all user transfers and withdrawals, filed for bankruptcy protection in the US this week. The legal document showed the company had a deficit of nearly $1.2 billion.
The company also plans to use its $167 million in cash to prop up some operations while it undergoes a financial restructuring.
Celsius said earlier this month it had about 1.7 million registered users and $6 billion in assets.
“The advent of the ‘cryptozyme’, combined with the well-publicized collapse of Luna and the failure of several crypto funds/exchanges, has led to a growing industry-wide reluctance to do business with companies like Celsius that held cryptoassets,” said a legal document signed by Celsius CEO Alex Mashinsky on Thursday.
Several U.S. state regulators are currently investigating Celsius’ activities, and one regulator said it believes the platform is “deeply insolvent.”
Other crypto assets are also under fire. This week the Financial Stability Board (FSB), an organization that advises countries on international financial matters, vowed to push for regulation of stablecoins – cryptocurrencies pegged to the value of dollars, pounds and other assets. A report on possible approaches is currently scheduled for October.
In addition, the US Treasury Department is working on a report for President Joe Biden on the risks and opportunities digital assets could bring through mass adoption.
All in all, the current cryptocurrency crisis is not the time many advocates would have chosen for international groups and official bodies to start paying more attention to the sector.
The NFT community received a shock on Thursday when OpenSea, which bills itself as the “first and largest” NFT marketplace, announced that it was cutting 20% of its team.
OpenSea co-founder and CEO Devin Finzer blamed an “unprecedented combination of cryptozim and broad macroeconomic instability.” However, he emphasized that the company has a “very strong” balance sheet.
The move highlights how more and more crypto companies that aggressively expanded last year are unable to sustain the same momentum during the 2022 bear market, when customers pulled their investments en masse. This created liquidity problems across the industry.
The question now is whether smaller rival NFT marketplaces will follow in OpenSea’s footsteps and downsize their staff – or use this time to recruit from the growing pool of crypto professionals desperate for new jobs.
With Bitcoin just below $21,000 while Ether was above $1,200 on Friday, not much has changed in terms of price performance over the past few weeks.
Data from crypto analytics platform Glassnode showed that the amount of Bitcoin held by long-term investors and/or lost by traders hit a new 19-month high of 7,376,212,666 BTC. This may indicate that traders are waiting for a bear market or that many have somehow lost access to their assets.