The crypto market had another mixed quarter with NFT losing ground and massive sell-offs while Bitcoin and DeFi show positive signs, as reported by CoinGecko.
Bitcoin Outperformed Other Assets Aside From USD
In comparison to Q2/2022, the crypto market grew by 6.5% in capitalization. Despite persistent volatility in the market, Bitcoin continues to dominate over other assets except for the USD.
The world’s largest cryptocurrency has remained in a narrow range between $19,000 and $20,000 while US equities continue to slide.
While equities have been largely on a downtrend for the past few weeks, Bitcoin has ended the quarter with only a -1% change in price.
Stablecoins are also one of the major highlights in CoinGecko’s report. Key findings reveal a quarterly loss of $4.7 billion – QoQ decline of 3% in the market cap of the leading stablecoins.
Notably, the USDC incurred $9 billion in loss after the sanction against Tornado cash imposed by the United States Office of Foreign Assets Control.
BUSD, on the other hand, grew 18% in its market cap. This bullish development for BUSD also corresponded with the launch of Binance’s Auto-conversion of BUSD.
The failures of Terra – LUNA, Celsius, Voyager, Three Arrows Capital, and a spate of other cryptocurrency scams have degraded stablecoins’ trustworthiness in the eyes of mainstream investors.
DeFi Didn’t Break, It Rebounded
Headlines surrounding DeFi projects have been strongly linked to exploits since the beginning of 2022.
But data from CoinGecko’s Q3 2022 Cryptocurrency Report reveals that the third quarter saw a 31% quarter-over-quarter increase in DeFi market capitalization. Despite disappointing performance of Ethereum post-Merge and the market chaos, DeFi impressively survived.
DEX shares increased by 36.8% to $10.9 billion, possibly due to an increase in trading volume and volatility for governance tokens of liquid staking protocols as a result of Ethereum’s upgrade Merge.
Notably, the market capitalization of the liquid staking industry increased to $1.54 billion. During that period, Lido, the leading liquidity provider for staked assets, saw its market cap increase by 264% to $1.60.
Despite the fact that the DeFi attack was reported to be caused by errors in verifying validators’ messages, DeFi and bridges’ bridges have always been targets hunted by attackers. Moreover, issues regarding censorship capability of DeFi projects could pose great challenges in the longer run.
NFTs are Dead?
The participation of famous artists, musicians, celebrities, and significant companies in the trading of cryptocurrency assets contributes to the rise in popularity of NFTs in 2021. Many artists have even made millions off of the sale of their work.
The community surrounding many well-known art projects that make use of NFT technology, such as the Bored Ape Yacht Club (BAYC), has become quite robust.
This year has seen a shift in interest. Investors are staying away from the NFT industry for a number of reasons, including the following: the ignorance of the community; the failure of companies; the potential of network attacks even against huge enterprises like Axie Infinity; and the risk of legal repercussions.
According to data from the report, the NFT (non-fungible token) market recorded a significant decline, as there were only $2.1 billion in total trading volume across the top 5 NFT marketplaces, OpenSea, Magic Eden, LooksRare, X2Y2 and CryptoPunks, down 77% compared to the last quarter.
One of the reasons for this dip is that interest rates have been steadily increasing over the past few years. This has made capital flow less interested in placing large hazardous bets on NFT, which is one of the asset classes with the highest degree of speculation.
Crypto community presumes that the Fed will maintain its course of gradual interest rate increases in the upcoming meetings.
The loosening of monetary policy by the central bank came to a stop, and investors responded by shifting their focus to much safer groups. A significant portion of NFT holders have observed a precipitous decline in the value of their holdings.