What will the third quarter look like in the crypto market?

Cryptocurrency market forecast for the third quarter

After announcing a disastrous second quarter of 2022, CryptoCompare attempts to take stock of the market and predict what may be the course of events for the coming months:

“The second quarter of 2022 was disastrous for the digital asset space. Bitcoin and Ethereum fell by 56.3 % and 67.4 % respectively, posting one of the worst quarterly performances in their history.

As for the past quarter, the event that definitely contributed greatly to this real crash was the collapse of the Terra ecosystem and its stablecoin, followed by the collapse of crypto hedge fund Three Arrows Capital.

Among the most interesting aspects highlighted in the report analyzing the cryptocurrency, DeFi and NFT market is the mention of how stablecoins withstood the impact of the UST collapse. IN analysis of the USDT buybacks scenario states:

The analysis assumes that Tether will initially use all cash positions to pay out redemptions and that only US-T vouchers will be used for subsequent redemptions. Of course, this would be in extreme market conditions where 10-30 % of USDT's total market cap is redeemed within 7-30 days.

"The above suggests that Tether's collateral structure is sustainable and will be able to handle the tough stress tests as it will be able to effectively cash out its T-bill balance and make significant buybacks." 

Since the possibility of such a large-scale bank run is unlikely, it gives confidence in the stability of these secured stablecoins, even if they have other problems, especially their centralization.

The DeFi and NFT sectors also fared very poorly

The DeFi and NFT markets are also closing the markets in the negative. Total Value Locked (TVL) in DeFi protocols fell by 65.7 % to $93.2 billion in Q2 2022.

The scenario for the near future seems to be mainly related to macroeconomic factors such as inflation data, which could have serious impacts on cryptocurrencies, as well as the prices of the dollar and the Nasdaq, which seem to be in an increasingly close correlation with the crypto market .

Analysts at CryptoCompare say that all signs point to the DeFi sector remaining at these levels in the coming months, with TVL expected to remain in the current range until the end of 2022:

"Another challenge for DeFi protocols going forward will be their adherence to the ethos of decentralization, with many DeFi protocols exhibiting behaviors reminiscent of centralized entities."

You might be interested in: 7 FAVORITE WAYS TO BUY A BITCOIN CARD IN 2022