New Nansen & Bybit Report Confirms TerraUSD Fallout Fiasco

The cryptocurrency industry is still reeling from the collapse of the UST stablecoin and Terra’s demise. A new report by Nansen and Bybit confirms investors look at this industry very differently, although that trend started before these recent incidents. Although things can always turn around, the current outlook isn’t too optimistic.

All Networks Are Suffering

It is safe to say the ongoing bearish market pressure has not been kind to the biggest crypto networks. More specifically, when looking at the Total Value Locked across major networks, things look very bleak today. Everywhere one looks, including Ethereum, BNB Chain, Polygon, Fantom, Cronos, and Waves, there is a steep drop-off in TVL in the past few months. Reversing such a trend is difficult but not entirely impossible.

This decline in Total Value Locked is partially due to Terra imploding, but the trend was prevalent before then. Current metrics are on par with those of July 2021, the last month before the ongoing bearish and sideways momentum keeping crypto markets in their grip. More importantly, all these networks have a similar transaction rate compared to May 2021, confirming all growth since then has been wiped out.

One upside to these metrics is how Avalanche notes strong growth in overall transaction processing. The network processes roughly 800,000 transactions, which isn’t far off Ethereum’s $ 1 million. Those metrics apply to April 2022, with more potential growth to be recorded this month. Competition among networks and layer-2 solutions remains crucial, as users deserve an optimal experience.

Moreover, there is upside potential for any network supporting stablecoins these days. Over 8% of the capital tracked by Nansen resides in stablecoins – except UST – as those provide a degree of stability in otherwise volatile market conditions. That increased demand for stablecoins also confirms investors have lost risk appetite, which explains why bitcoin and ethereum show similar price charts to the Nasdaq Composite as of late.

Declining Outflow And Derivatives Interest

Whereas investors have less appetite for traditional cryptocurrencies, the same trend affects derivatives. More specifically, the open interest in crypto derivatives is still on a downward slope since early May 2022. That is a bit surprising, considering this metric hit a substantial peak on April 5, 2022. Momentum can turn around very quickly in this industry, and these findings are a good example of markets never sleeping.

Furthermore, the total liquidations across various cryptocurrencies have tapered off, which is good, in a way. Unfortunately, it can also signal investors seeking far less exposure to long and short positions, as there isn’t enough profit potential in either direction. Fewer people want to take a risk on these markets, although a persistent market route can hint at an accumulation period. Unfortunately, the growing exposure to stablecoins and declining ETH exchange outflow seems to indicate an opposite outcome.

Speaking of being less keen on risk, NFTs have seen a strong outflow of enthusiasm. Current statistics are on par with January 2022, with social NFTs representing the bulk of the market. The remainder primarily encompasses gaming NFTs, with little or no room for any other types of non-fungible tokens these days. That is an interesting development, although one that doesn’t necessarily bode well for the NFT industry.

A Crucial Second Half Of 2022 Lies Ahead

There isn’t much to be excited about in this report by Bybit and Nansen. However, it is not all black-and-white either, as there are still intriguing findings. Avalanche’s growing momentum in the transaction capacity space and growing stablecoin exposure can signal a future market rebound with plenty of momentum behind it. If and when that rebound will happen is a different matter.

Moreover, the recent Terra and UST scare has put all networks on high alert. Growing too fast too quickly, without ample anchors in place to prevent a collapse, cannot happen again. The lessons learned from Terra and UST are very expensive, but the industry will likely recover from this setback eventually.

Being an active participant in the Blockchain world, I always look forward to engage with opportunities where I could share my love towards digital transformation.

The presented content may include the personal opinion of the author and is subject to market condition. Do your market research before investing in cryptocurrencies. The author or the publication does not hold any responsibility for your personal financial loss.

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