Worst quarter in 11 years as Bitcoin price and activity plunges

July 1, 2022 Coin Telegraph

Bitcoin

Quarterly returns on Bitcoin haven’t been this bad since it was trading under $20 in the early days of Mt. Gox, but the stock market isn’t faring so hot either.

Bitcoin (BTC) has seen its worst quarterly loss in 11 years with price and activity on the blockchain both plunging over the last three months.

The second quarter ending June 30 saw Bitcoin’s price fall from around $45,000 at the start of the quarter to trade at $19,884 before midnight ET on June 30 according to CoinGecko, representing a 56.2% loss according to crypto analytics platform Coinglass.

It’s the steepest price fall since the third quarter of 2011, when BTC fell from $15.40 to $5.03, a loss of over 67% and worse than the bear markets of 2014 and 2018, when Bitcoin’s price slumped 39.7% and 49.7% in their worst quarters respectively.

The past quarter saw eight weekly red candles in a row for Bitcoin and the month of June saw a draw down of over 37%, the heaviest monthly losses since September 2011 which saw the price fall more thaner 38.5% in the month.

There are also signs that investors are keeping their powder dry — or they've run out of funds — during the bear. Activity on the blockchain is taking a dive with Bitcoin’s spot volume — the total amount of coins transacting on the blockchain — dropped over 58.5% in just nine days according to a June 29 analysis from Arcane Research.

But its not just crypto markets in turmoil. Thanks to sky high inflation and rising interest rates the traditional stock market has also taken a pounding, with some calling it the “worst quarter ever” for stocks.

Charlie Bilello, CEO of Financial advisory firm Compound Capital Advisors shared a chart on Twitter showing the S&P 500 index was down 20.6% in the first half of 2022, the worst start to the year for the index since 1962, when price return was -26.5%.

The S&P was down 20.6% in the first half of 2022, the worst start to a year for the index since 1962. $SPX pic.twitter.com/OMcX7yfP5o
— Charlie Bilello (@charliebilello) June 30, 2022

The difficult economic conditions have seen a swath of staff layoffs from crypto companies including Gemini, Crypto.com and BlockFi. Most recently the crypto and stock trading platform Bitpanda cut its employee count by approximately 277 full-time and part-time employees.

Crypto is closely tied to the wider tech sector and the tech heavy NASDAQ composite index has fell by almost 22.5% over the second quarter.

A “Tech Layoff Tracker” from technology jobs board TrueUp reveals over 26,000 tech employees across 200 company wide cutbacks just in June alone.

Over the quarter, 307 layoffs impacted over 52,000 staff with one of the largest coming from Elon Musk’s Tesla, with 3,500 impacted. Crypto exchange Coinbase features twice, firstly for its June 2 hiring freeze and job offer rescission of nearly 350 people and second for its June 14 staff layoff, affecting 1,100 individuals.

Bear market will last until crypto apps are actually useful: Mark Cuban

June 29, 2022 Coin Telegraph

Bankless

The billionaire investor said a bigger focus on applications and utility outside of finance would bring more back to the crypto space and possibly reverse the declining market.

Mark Cuban, the billionaire entrepreneur known for his role as one of the main investors on the reality television show Shark Tank, said the crypto bear market won't be over until there’s a better focus on applications with utility.

He also doesn’t think the market has hit “cheap” prices yet.

Cuban has stated in the past around 80% of his non-Shark Tank portfolio was in crypto. Appearing on a June 23 episode of the Bankless Podcast, he was asked how long he believes the current crypto bear market will last:

“It lasts until there's a catalyst and that catalyst is going to be an application, or we get so low people go ‘fuck it I'll buy some’”.

He believes a better focus on applications with utility will pull crypto from its slump and with so many apps focused on financial technology or collectibles, the launch of a business focused application would be one of such events that could spark a reversal for markets.

Using the example of a “decentralized version of Quickbooks”, a small business accounting management software, Cuban predicted a rush of users if something like that launched.

Despite analysts predicting that Bitcoin (BTC) as well as many other cryptocurrencies have hit a price bottom, Cuban says “it’s not cheap yet” when analyzing the high market capitalization of some projects.

“You look at the market caps, and you see it's a billion dollar plus market cap or $6 billion or $8 billion or $40 billion you don't look at that and go ‘that's cheap’. If you remember back to DeFi summer, these things were selling for less than a penny and their market caps were in the hundreds of millions.”

He adds even with lower market cap cryptos “there’s no utility”, and gives an example of the decentralized exchange SushiSwap (SUSHI) token as a “relatively cheap” buy with its $215 million market cap, but added:

“You get paid it if you're a liquidity provider, but then who's going to buy it from you? What's the reason to buy it from you?”

Cuban believes mergers between different protocols and blockchains will eventually see the crypto industry consolidate, as “that’s what happens in every industry”.

“I'd rather get with somebody who says ‘let's do a roll-up’,” with Cuban saying that he’d support a merge of various blockchains, close others and then move applications and communities over to just one and offer a token exchange or bridge from the closing blockchains to port users over.

“Now all of a sudden your user base is 10x, you still have a problem of better applications, you still have to have some reason people want to use that blockchain but at least you may be able to have a better community to come up with ideas because otherwise you’re gone.”

With the crypto space having various sub sectors such as Layer 1’s, Layer 2’s, NFTs and DeFi tokens, Cuban was asked which he was most optimistic on.

Cuban said he was particularly interested in carbon offset DeFi tokens which he burns to offset his own personal carbon footprint. He added whilst not everyone cares about offsetting their carbon emissions, it was the “easiest way” in comparison to buying carbon offsets from a broker, which he claims is “a pain in the ass.”

Ultimately though, Cuban said “all of them have potential, that's why they got all this money, all of them have a reason why they think they're better and will succeed”.

Moody’s downgrades Coinbase due to bear: Warns it may not be the last

June 24, 2022 Coin Telegraph

CFR rating

Moody’s said further downgrades could follow if Coinbase doesn’t diversify from its current revenue model or it's unable to turn a profit even in a prolonged bear market.

Credit ratings agency Moody’s has downgraded the Corporate Family Rating (CFR) and guaranteed senior unsecured notes of crypto exchange Coinbase, and stated that both ratings have been placed under review for further downgrade.

The CFR, a rating assigned to reflect Moody’s opinion of a company’s ability to honor its financial obligations, was downgraded from Ba2 to Ba3 which is considered as below non-investment grade.

Senior unsecured notes are a type of debt a company holds that is not backed by any assets and in the event of bankruptcy must be repaid before any others. Moody’s downgraded Coinbase’s from Ba1 to Ba2.

Earlier in May, Cointelegraph reported Coinbase’s junk bonds tanked in response to an underwhelming first quarter and since the report, the bonds have continued to fall a further 9.5%.

In its rationale for the downgrades, Moody’s highlighted Coinbase’s revenue model “is tied to trading volumes, transaction activity per user and overall crypto asset prices.” It said the steep price decline in crypto over the past months has caused customer trading activity to wane, which in turn caused weaker revenue and cash flow to the company.

The uncertain environment forced Coinbase to layoff about 18% of its staff on June 14. But even with this measure, Moody’s said it expects Coinbase’s profitability to “remain challenged in the current environment”.

Competition for customers has also been heating up in the United States after Binance.US began offering zero-fees spot trading for Bitcoin (BTC). The offer follows in the footsteps of trading platform Robinhood which pioneered no-commission crypto-trading in 2018.

In a bid to attract users to the platform, on June 23 Coinbase added five new Ethereum (ETH) ERC-20 tokens plus the ability for users to send and receive some assets on the Polygon (MATIC) network along with USD Coin (USDC) on Solana (SOL).

Moody’s said it could call out for further downgrades should crypto prices continue to fall and if trading volumes on the exchange remain the same or fall further. It will also look at whether the firm can reduce expenses, its ability to maintain talent as well as potential “crypto asset regulatory developments.”

The ratings agency added that Coinbase’s ratings could be upgraded again in the future if it can generate a profit even during a bear market and diversifies its revenue through other streams not associated with trading and cryptocurrency prices, noting that crypto transaction-based revenue represented 87% of Coinbase’s net revenue in Q1 2022.

Coinbase's shares were up 13.4% to close at $58.88 on Thursday, but fell just over 1% in after hours trading. Year to date, its shares are down nearly 77%.