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The crypto industry faces its worst days ever — How did we get here?

Fleeing investors, withdrawal halts and hiring freezes wipe off billions of crypto valuation

The crypto industry faces its worst days ever — How did we get here?
The worst may not be behind us matejmo/iStock

We have been reporting for a while that the crypto industry is going through a rather rough phase. However, Monday was the industry's worst day ever, with nothing going right for the currencies or the companies that deal in them, CNBC reported

The entire crypto industry was riding the high waves in November last year. The most popular cryptocurrency, Bitcoin, reached its all-time-high valuation of $68,991. Crypto.com, an app to trade cryptocurrencies, had secured rights to naming a sports arena in Los Angeles after itself for a whopping $700 million price tag.

Even as the prices of cryptocurrencies began to drop in the following months, another crypto app spent $14 million to float its quick response (QR) code on screen for one minute during Super Bowl in February. Now, the Bitcoin is languishing at $22,000 while the companies are acting to secure themselves for an approaching 'crypto winter'. 

What led to this?

As the world returned to the pre-pandemic normal at the beginning of 2022, cryptocurrencies began to lose their sheen. Market valuations were already shrinking when the U.S. Federal Reserve announced its most significant interest hike in decades, which sent cryptocurrency values tumbling down last month. 

Bitcoin was barely managing to hold a position when cryptocurrency companies began tightening their purse strings to prepare for the tough times ahead. Coinbase, which splurged millions to showcase its QR code just a few months ago, went soft on its hiring in May but put a complete stop as we entered June, The Verge reported. The company had also launched an NFT marketplace in May but received a lackluster response and the company's plans to add 2,000 employees this year alone came to a grinding halt. 

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Last week, Crypto.com announced that it was reducing its staff strength by 260 people while another crypto exchange, Gemini, announced laying off 10 percent of its workforce, CNBC reported.

BlockFi, another crypto trading company announced that it was laying off 20 percent of its employees, that's 170-200 jobs, The Verge reported. These layoffs are quite in tandem with those announced by other technology companies like Netflix, Tesla, and Cameo. But the impact of these decisions has been severe on the crypto industry. 

What happened on Monday? 

All hell broke loose on Monday when Celsius, a popular crypto platform, announced that it was halting all withdrawals, swaps, and transfers due to "extreme market conditions". The liquidity of the company has been under question in the past but by locking over $12 billion in crypto investments, the company sent shockwaves through the market. 

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Though unconnected, popular trading platform, Binance, also announced a withdrawal halt. The company later clarified that the halt was temporary and due to a technical issue, which was resolved after about three hours. But this was enough to panic investors into dumping their holdings in Bitcoin and looking for safer havens. 

Bitcoin prices slumped to an 18-month low after they lost 15 percent of their value. Ethereum was a bigger loser with a 17 percent loss in its value, CNBC said in its report. Overall, the market cap of the crypto industry dropped below $1 trillion, less than a third from its November peak, making it the worst day in its history. 

Even as investment banks like Morgan Chase are backing Bitcoin to bounce back, fears of another rate hike from the Federal Reserve could cryptocurrencies further. 

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The worst may not yet be behind us. 

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