Warren Buffett once said “only when the tide goes out do you discover who’s been swimming naked.” That is certainly true for the return of crypto winter. Exchanges halting trades, $1.2 billion in losses, and big layoffs are all exposing who’s been skinny dipping. Disruptions–both good and bad–are showing the real world effects of the crypto winter.

Liquidity in peril

Major exchanges and lending platforms halted trading last week. On Monday, Celsius cited “extreme market conditions” and froze all account withdrawals to stabilize liquidity.

That same day Binance paused Bitcoin withdrawals due to a “stuck transaction.” 

Ethereum squeezed by energy prices

Ethereum is facing two concurrent challenges during this crypto winter. As @scottmelker pointed out on Twitter, 

Image courtesy: Messari

Eth has oversold on the weekly for the first time since November 2018. It is now trading at an 18.4% loss. 
Furthermore, the Ethereum Foundation is facing increased pressure to complete its Merge from proof-of-work (PoW) to proof-of-stake (PoS) consensus mechanism. 

Miners have always been incentivized to use the cheapest form of electricity to run their operations. The squeeze is coming from increased energy prices (up 34% this year) due to inflation which cuts into miners’ profits. Mining will no longer be needed after the Merge. 

Bear market price grabs

Though many investors are hurting, there are some that are taking advantage of bear market low prices. Andreeson Horowitz has launched a $4.5 billow fund to acquire various crypto assets. 

The VC firm made the decision based on their belief that “we are now entering the golden era of web3.”

Altcoins make big plays

Polygon and Cardano have been under the radar during the downturn but both are making huge strides. Stablecoin Circle is partnering with Polygon to support its treasury payment platform, citing a growing mass adoption of Polygon. 

Meanwhile, Cardano retains the achievement of being the most scalable smart contract deployment platform. It is one of the most secure and energy-efficient PoS platforms and is mainly used to deploy dApps for identity management and traceability. 

The fundamentals of both Cardano and Polygon have stayed strong throughout their history and are getting stronger.

Crypto layoffs 

Major crypto companies are shedding new hires to reduce expenses. Coinbase cut its employees by 18% and rescinded job offers; CEO Brian Armstrong admitted the company “grew too quickly.” 

Gemini has cut its workforce by 10% (260 jobs) and Crypto.com by 5% (400 jobs). 

By contrast, Polygon, Kraken and Binance have positioned themselves to be hiring right now. At Consensus 2022 this week in Austin, Binance CEO Changpeng Zhao said the company is “expanding hiring right now.” 

Zhao was also quoted as saying “if we are in a crypto winter, we will leverage that, we will use it to the max.”

Despite the gloom and doom, none of these factors will kill the industry – in whole or in part. As tough as the downturns are, they are merely signaling a restructuring of the crypto market. 

Inflation is at an all time high and people are naturally weary of any volatile investment, crypto especially. 

Nevertheless, the market continues to value decentralized technology and the power of the blockchain will see the industry through this current storm.