Bitcoin just had its worst quarter since 2011 and its worst month on record.
The world’s largest cryptocurrency lost about 58% of value in the second quarter of 2022. Around $1.2 trillion has been wiped off the entire cryptocurrency market.
Amid the chaos, crypto firms have announced layoffs and the industry is moving toward consolidation via acquisitions.
Here are five flashpoints that hit the cryptocurrency industry last quarter.
1. Macroeconomic pressure
During the quarter, the U.S. Federal Reserve carried out two aggressive interest rate hikes to battle rampant inflation. That has sparked fears of a recession in the U.S. and other countries.
It has also hit stocks, in particular high-growth technology names. The tech-heavy Nasdaq Composite is down 22.4% for the second quarter, its worst quarterly performance since 2008.
Bitcoin has been closely correlated to the price movement of U.S. stock indexes. The stock sell-off has weighed on bitcoin and the crypto market as investors dump risky assets.
2. TerraUSD collapse
The first major episode last quarter was the collapse of the algorithmic stablecoin terraUSD and sister token luna which sent shockwaves through the industry.
A stablecoin is a type of cryptocurrency usually pegged to a real-world asset. TerraUSD, or UST, was supposed to be pegged one-to-one with the U.S. dollar. Some stablecoins are backed by real assets such as fiat currency or government bonds. But UST was governed by an algorithm and a complex system of burning and minting coins.
That system failed. TerraUSD lost its dollar peg and brought on the demise of associated token luna which became worthless.