We see it happen time and time again where a project or company, whether in the crypto space or on the stock market, gains a wild amount of hype, attracts investors by the droves, and then suddenly bang and the project collapses.
In this article, we take a look at the stock and crypto markets over the last few months and look at how a project’s support can disintegrate seemingly overnight. With crashing prices across stock and crypto markets, where are investors turning?
Tech Stocks Come And Go
Tech investor, David Sacks, tweeted ”Investor sentiment in Silicon Valley is the most negative since the dot-com crash.”
While some tech stocks remain valuable, there has been an influx of ones that have risen to great heights only to crash and burn at a later stage. While there are indeed other factors at work like the war in Ukraine, rising inflation rates and the after-effects of the pandemic still causing friction in the market, we’re not talking about stocks affected by this set of macroeconomic variables.
Tech stocks were being hit long before these were factors, with cloud software, e-commerce, fintech and consumer devices being the most badly affected. Despite companies having upbeat forecasts and revenue beating estimates, the share prices are still plummeting.
Since peaking in late 2021, many stocks have lost at least 75% of their value, with some of the bigger names down 90%. Wish, the discount mobile commerce app, went from trading at a high of $32.85 in early 2021 to currently trading at $1.99. Robinhood, the brokerage and trading app of meme stardom, is down 87% from its high in August, and Peloton, the exercise equipment and fitness company is down 83% from last July.
The market is changing course and no longer blindly supporting stocks that are over-hyped.
Crypto Projects That Disintegrate
While the greater crypto landscape saw billions wiped off in just a few days of June, the market has seen an almost 60% decrease in value since the beginning of the year.
In this timeframe, two projects have undergone collapses, painting an (unjustly) unreliable picture of the crypto industry. Investors lost millions, confirming that the golden rule of crypto investing is to always know what you’re getting into, and by that, we mean extensively researching the project and fully vetting the platform behind the coin before investing.
In terms of the biggest crypto debacles to date, Terra, a blockchain platform that operated the algorithmic stablecoin TerraUSD with its other coin, LUNA, officially halted blockchain operations in May following the unpegging of TerraUSD.
Seemingly out of nowhere, LUNA climbed into the top 10 biggest cryptocurrencies last year causing the world to take notice. While many investors jumped on the bandwagon and bought into the coin, many others discovered that this rise in market cap was due to a large-scale burn operation conducted by the company.
Several months later, lacking any substantial utility, the LUNA price crashed from highs of $119 to fractions of a cent. The project then renamed the token to Terra Classic (LUNC) and launched another Terra LUNA coin following a community vote. Investors are advised to proceed with caution on this one.
The Freezing Temperatures of Celcius
Another hot topic in the crypto space is Celcius, a centralized exchange platform currently gaining traction for some questionable market activities. After being entrusted with $12 billion worth of assets from users on the platform, Celsius halted withdrawals Sunday, June 12 to “stabilize liquidity” and “preserve and protect assets”. It is speculated that the Terra/LUNA collapse in May sparked a liquidity pinch which became a catalyst in the unravelling of Celcius.
In just an hour following the withdrawal announcement, the platform’s native token lost 70% of its value, down 92% from its all-time high of $8.02 achieved a year ago.
Celcius operated as a crypto bank, offering users an opportunity to lend, borrow, and earn as much as 18% per annum on deposits made through the platform. After launching in 2017, Celsius became a hot commodity during the pandemic and by October 2021 had accumulated $26 billion.
It was unclear how Celcius could provide these returns, although when probed the company said: “through various investments.” However, when the bull market took a turn downwards, these investments proved unreliable. In December 2021 it reportedly lost $50 million in the BadgerDAO hack and then $70 million in February 2022 when the Stakehound protocol “lost” their clients’ private keys.
The Takeaway
With stock and crypto markets both entering bear territory, and oil at its highest price in 13 years, where are investors turning? Energy and utilities, it turns out. Utilities in both the water and electricity realm, as well as cryptocurrencies that represent real utility.
It sounds all doom and gloom, however, some stocks and cryptocurrencies have seen positive growth over the last several weeks. At the time of writing Boeing is up 9% while Chipotle is up 5% in the stock markets. On the crypto front, Oobit’s OBT token saw gains while the market was crashing, but as things appear to recover, at the time of writing Cardano is up 12% and XRP up 10%.
The key takeaway is to only invest in projects that you have extensively and fully researched. If a platform claims to give you returns of 18%, find out how they propose to do this. While advice is nice, ensure that it can be verified and is not blindly followed.
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