Capital Retreats – Warning Signs of a Crash?

The crypto is in the bear market. The prices of most cryptocurrencies have been moving sideways for months, with a slight downward trend. During the historic inflation, pandemic and war crisis, a lot of capital fled the crypto market in April 2022 – including institutional investors. Almost all sectors are affected. These are the data for NFTs and DeFi, for Bitcoin and Ethereum funds.

1. NFT Market Crash: Volume Collapses 90%

“NFT Sales Plunge” headlined the Washington Post this week. So-called non-fungible tokens are proof of ownership of a digital asset on the blockchain, such as music or images.

The market has seen a rapid rise from 2020 to September 2021. Even during this peak phase, critics were talking about a bubble just waiting to burst. That’s exactly what happened: according to the Washington Post, NFT trading volume fell 92% from its all-time high.

A good example of the downward trend is the NFT of Jack Dorsey’s world’s first tweet. Bought for almost 2.9 million US dollars in 2021, it is now worth almost nothing.

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The overall trading volume of the largest NFT marketplace, Open Sea, fell 70% in February.

At the same time, there are also positive signals. According to a new report from Chainalysis, the number of active buyers and sellers is increasing. Bored Ape Yacht Club’s sale of the Metaverse digital land in early May 2022 generated record sales of nearly $2 billion.

You can read a detailed analysis of the NFT report from data service provider Chainalysis here.

2. The DeFi market loses more than 20%

The DeFi sector has also exploded from 2020. DeFi is an alternative and decentralized financial system, open to everyone who has access to the Internet. It brings together a dense network of protocols, decentralized applications and platforms that work with blockchains. Hundreds of services now exist.

Using so-called smart contracts, money in the form of cryptocurrencies is programmed in such a way that it performs various functions almost automatically, including lending and borrowing, for example. This increases efficiency and removes middlemen (like traditional banks) from the equation.

The total circulating capital in DeFi is called Total Value Locked (TVL for short). It fell from $630 million to an all-time high of $250 billion, also in November 2021. From this all-time high, DeFi has lost almost 20% of its assets, including 10% in April alone.

Currently, the TVL in DeFi is still proud of US$205 billion.

3. Institutional investors are pulling out of Bitcoin and Ethereum funds

According to investment firm Coinshares’ weekly report, a total of $339 million in institutional funds flowed out of Bitcoin in April. The last week of April saw the biggest exodus of institutional investors since June 2021. Most of them were in bitcoin funds.

A similar picture is emerging for Ethereum: nearly US$200 million in institutional funds have been poured in over the past five weeks, with 10% in the last week of April alone.

Bitcoin and Ethereum both lost nearly 20% of their value in April, according to Coinmarketcap.

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