Crypto Market Has Returned to Post-Terra-Collapse Levels

The value of all crypto in circulation has been consolidating following Friday’s nudge higher to levels not seen since around the time failed algorithmic stablecoin project Terra collapsed in May 2022.

Total market capitalization reached a peak of $1.26 trillion, retracing slightly to $1.23 trillion as of Monday. That’s the highest point since last June, in the aftermath of a harrowing month for the crypto market which witnessed the fall of Terra’s digital assets ecosystem.

“Although the sector is currently not large enough to cause systemic risks, we must not forget about the collapse of Terra Luna, Celsius and FTX,” Keith Choy, Interim Head of the Intermediaries at Hong Kong’s SFC said in a keynote address during a Web3 conference last week. “Such failures underscore how critical it is to regulate this industry.”

The Terra crisis, brought about by a severe de-pegging of its algorithmic stablecoin UST, led to investor losses totaling more than $40 billion. It ended any aspirations for a quick market recovery following a 40% drawdown from the November 2021 peak when the price of bitcoin (BTC) hit $69,000 and the total crypto market capitalization topped $2.9 trillion.

Terra’s fall precipitated a market cap breakdown from about $1.6 trillion to $800 billion over the course of a month. The collapse of other major firms later in 2022, culminating in the demise of FTX in November, forced the market to its lowest point in two years at $730 billion.

While a timeline for regulatory certainty remains hazy, at least in the US, other jurisdictions such as Hong Kong are attempting inroads to ensure the specter of 2022’s failings don’t cause investors further harm.

US investors in the bitcoin futures market are also demonstrating consistently positive bias, according to a report last week by investment management firm NYDIG. 

The annualized rolling 1-month futures basis, which measures the difference between futures trading on the CME and spot bitcoin, has remained positive for US investors. It suggests US investors are more bullish on bitcoin compared to their international peers, the firm said.

The uplift in digital assets has also attracted larger allocations of capital to bitcoin, as its dominance — or total share of the crypto market — is now at its highest point since June of last year at 47%, but at a level which has been rejected on five prior occasions over the past 2 years.

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