And so where do we go from here?
The cryptocurrency sector has been severely pounded in recent weeks, leaving investors wondering what will happen next.
Industry analysts say they see a sector that is against the ropes with regulators preparing to--quite literally--lay down the law.
'We're in a Bear Market'
"As major tokens like Bitcoin fell more than 50% from their all-time highs, we’re in a bear market," said said Winston Ma, managing partner of CloudTree Ventures, Author of "The Digital War – How China’s Tech Power Shapes the Future of AI, Blockchain and Cyberspace." "And it should be welcomed because it is a chance to get rid of the bad actors and focus on building products. No all tokens are created equal."
Ma said that stablecoins and regulation are two other major topics for the cryptocurrency industry.
A stablecoin is a digital currency whose value is pegged to a stable reserve asset, like the U.S. dollar, the euro or gold.
Stablecoins are supposed to be backed by assets in dollars or euros whose fair value must be at least equivalent to the number of coins in circulation.
The idea is to bring peace of mind to investors who are still reluctant to invest in crypto, but that concept was rocked to its core following the collapse of the stablecoin UST, or TerraUSD, and its token sister Luna.
UST lost its dollar peg when millions of investors all wanted to redeem their tokens at the same time.
"The terraUSD collapse made it very clear to people that not all stablecoins are (always) stable," Ma said. "The regulation of stablecoin may be the first to come amid US government’s current crypto regulatory push."
'Sounding the Alarm'
David Lesperance, managing partner of immigration and tax adviser at Lesperance & Associates, noted that a former executive of OpenSea, the largest marketplace for nonfungible tokens, or NFTs, was recently indicted by federal officials.
Nathaniel Chastain, 31, has been charged with one count of wire fraud and one count of money laundering.
"Whether crypto consumer protections such as the stable-coin crisis or NFT fraud or societal protection such as crypto's carbon footprint or money laundering," Lesperance said, "regulators are moving in at lightening speed into the crypto universe."
Frank Corva, senior analyst for crypto and blockchain at Finder, said bitcoin has been trading in a range between roughly $28,000 and $69,000 for the past 18 months.
"It’s currently trading at about $31,000, and whenever its price comes down to these lower ranges, crypto traders start sounding the alarm that bitcoin’s price will drop far lower," Corva said, "while mainstream media journalists begin to pronounce bitcoin dead for the nth time."
He said that this panic at the lows is what some refer to as traders being “bearish at support,”which is the opposite of being “bullish at resistance.”
'Tightening Across the Board'
"In layperson’s terms, this means that traders tend to express their fear that prices will go lower when prices are near their lows and proclaim that prices are going 'to the moon' - or up much higher - when prices are near their all-time highs," Corva said. "So, is this time any different? Are market participants just being bearish at support? No one can tell for sure."
He added that summer is a notoriously slow season for all markets, though, as traders tend to “sell in May and go away."
"It wouldn’t be surprising to see crypto markets trade in this support area - and maybe even dip a bit lower - for the next two to three months," Corva said.
And it’s not just crypto asset holders that are feeling the pain.
Corva said some who work in the industry are scared for their jobs after one of the largest crypto exchanges, Coinbase (COIN), recently rescinded job offers to employees who were set to start working for the company shortly.
Gemini, another major crypto exchange, laid off 10% of its staff this week.
"These layoffs and hiring freezes likely have more to do with the fact that both crypto and traditional markets are down and that financial conditions are tightening across the board," Corva said. "Traders and crypto employees alike are sitting tight as both crypto markets and the crypto industry remain against the ropes."
