The cryptocurrency market is in turmoil, mirroring both the U.S. stock market and the emotional state of many of its citizens. Though some crypto investors have found astronomical financial success, skeptics have long voiced concerns about the volatility and inherent peril of pursuing such investments. These naysayers have ground to stand on given the instability of Spring 2022, as more than “$700 billion has been wiped out” from the crypto-economy, entire currencies have collapsed, and related companies and market exchanges are scrambling in response to the downturn. 

Crypto markets have positioned themselves as a “wild west” alternative to traditional investing, beginning without the regulations and safeguards that accompany conventional investment channels. However, crypto fortunes are still largely influenced by the ups and downs of the stock market. So far this year, the S&P 500 has dropped nearly 20%. Bitcoin took that cue and ran with it, falling ”about 72% from its all-time high of $68,990.90 that was hit in November [2021].”  Its price currently hovers in the $19,000-20,000 range. 

As the value of Bitcoin nosedived, it fell beneath an important benchmark with environmental implications. At $25,200 and above per coin, Bitcoin miners are assured to make a profit over their energy costs. Below that threshold, however, the economic logic of mining new coins begins to weaken. While miners who turned enormous profits when the price was high may be able to sustain operations temporarily, many will certainly slow or cease. Last year, the Bitcoin network used “the same amount of electricity used by all the data centers in the world every year.” Should the price remain below $24,000, The Verge reports that the energy savings could be equivalent to the “amount of electricity…Ireland uses in a year.”

With Bitcoin’s value so dramatically reduced, it is no surprise that other smaller currencies are struggling or collapsing altogether. One such example is Terra, a blockchain that hosts a stablecoin cryptocurrency of the same name and its sister currency Luna. Stablecoins are meant to maintain a value of approximately $1; however, the market dive combined with the algorithmic machinations that seek to stabilize the value instead caused the price to plummet. In attempting to regain the reigns, Terra has repeatedly paused and unpaused trading and major crypto exchange platforms delisted the currency entirely. 

Crypto exchanges are encountering significant issues of their own. After spending $14 million on a Super Bowl ad in February, Coinbase announced in mid-June that it would be reducing its team by 18% (1,100 employees). Similarly, Crypto.com recently paid $700 million to brand the home of the Los Angeles Lakers and other professional sports teams in the city. Now, the company is cutting 5% of its employees. While it made sense for these and other similar companies to staff up during the crypto boom, many now fear that a “crypto winter” has arrived and are making deep cuts.

NFT sales are also diminishing in the wake of “the broader slowdown in crypto markets.” In June 2022, NFT sales fell to their lowest point since June 2021. Both trading volume and user counts on OpenSea.io are down. Reliable NFT investments have remained surprisingly stable; “the price of the cheapest NFT in the Bored Ape Yacht Club has declined by only 1%” though it dipped significantly before regaining its footing. However, more novel pieces, like the NFT of Twitter co-founder Jack Dorsey’s first tweet, have fallen from fetching blockbuster, multi-million dollar figures to low five-figure totals.

The industry-wide havoc may spur regulators to act more decisively. 40 states already have or are working to enact regulatory legislation. Last year, the President’s Working Group on Financial Markets released a report warning of the strong risk potential of stablecoins. This group also “called on Congress to pass new legislation limiting stablecoin issuance to insured banks.” Regulation is an issue that will need to be considered through an international lens as well, given the digital and therefore “borderless” nature of the industry. Though the decentralized and unregulated nature of the crypto world was a big draw to early adopters, “many market participants are desperately seeking a more defined regulatory framework and thus, certainty.” Therefore, it will now be crucial for crypto-philes to cooperate and occupy a seat at the table as these regulatory and legislative decisions are shaped and executed.