The cryptocurrency market has been nothing short of a financial soap opera in 2022, and the drama continued this week when the lender Celsius Network filed for bankruptcy protection. Yet there is one important place where the drama has cooled off noticeably: the actual prices of the largest digital tokens themselves.
The relative stabilization in the charts is fueling hopes that contagion may have run its course following the spectacular collapse of tokens on the Terra blockchain, a wipeout that also sent hedge fund Three Arrows Capital and brokerage Voyager Digital into bankruptcy court. While much of the crypto world’s leverage is not recorded on blockchains, and therefore hidden from scrutiny, what is visible is encouraging, according to James Check, lead analyst at Glassnode.
There are two important sources of potential sellers that are left, Check caveats. One is Bitcoin miners, who have seen the value of their hardware plunge along with the price of the token — stress that could worsen if Celsius’s mining subsidiary starts unloading some of its 80,850 rigs to raise capital. The other is traders who will indiscriminately sell risk assets of all kinds if the stock market starts to collapse again.
Fresh catalysts are needed to push prices decisively one way or another, according to James Malcolm, head of foreign exchange and crypto research at UBS. One good sign that the market could be normalizing, though, is the strong performance of second-tier tokens such as of Matic and Aave.