Terra’s Crash: The First Domino Precipitating a Long-Foretold Crypto Winter

For months, cryptocurrency bears, sceptics, and even some of the most optimistic forecasters have been sounding the alarm: Winter is coming to the cryptocurrency markets.

A Look at the Remnants of Terra

A Terra official said that the revival plan does not involve a "fork" of the existing chain, but the creation of a new one. Most of the popular dApps built on Terra Classic have already committed to migration.

Another negative side of LUNA is the confusion with the tax authorities in South Korea. There are rumours now that most of the assets of the Luna Foundation Guard are being blocked. South Korean police freeze the assets of a crypto fund that backed the UST stablecoin. Also, law enforcement agencies turned to several exchanges with a request to block the assets of LFG representatives.

All these factors and the confusion with LUNA are negative factors confirming that it is almost impossible to prevent the impending crypto winter.❄️

The explosion of LUNA and UST on Terra drags the already weak market along with it. What do other events say about the long-term future of cryptocurrencies?🤔

Crypto Space is Weathering a Bitter Storm

Bitcoin’s fall below $30,000, record inflation rates in the US, the intention of the Federal Reserve to raise interest rates, and the risk of a recession after cutting the trillions of dollars poured into the US economy, leads to the fact that the global and virtual market could enter a crypto winter.

Ethereum has also fallen by about 58% from its all-time high, while the value of altcoins has fallen by about 80%. This situation is exacerbated by the sudden collapse of $40 billion in LUNA and TerraUSD, which had a ‘domino effect’ on the cryptocurrency market, crashing the price of Bitcoin and accelerating the loss of $300 billion across the entire crypto-economy.

To top it all off, total value locked (TVL) in DeFi dropped to $56 billion last week, according to industry watcher DeFi Pulse, and even NFTs dropped 65%. Overall, cryptocurrency markets lost a total of $1 trillion in April. However, countries are not going to give up their participation in the crypto space and blockchain. For example, the UK government says it plans to regulate cryptocurrencies, including allowing the use of stablecoins as a form of payment.⚖️

In turn, venture capital firm Andreessen Horowitz, in its first report on the state of crypto, affirmed that the market is now in the middle of the fourth cycle of “price innovation”, which will lead to innovation and growth in the long term and the beginning of a new cycle. But when it starts, the report does not indicate.

How long the crypto winter will last will depend on many other factors, including a drop in consumer demand in many countries, record inflation not only in the US but also in the EU, the risk of famine in the Middle East, and problems in the Chinese economy. The cryptocurrency market turned out to be very strongly connected with the global financial system, and all the problems that occur in it are very quickly reflected in it. It remains only to observe how events in the global economy will develop further, and wait for the crypto winter to end.

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