What will Q3 of 2022 look like for crypto?

After analyzing the disastrous Q2 for the crypto market, a report from CryptoCompare tries to predict what will happen in the coming months.

A Q3 prediction for the crypto market

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

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

As for the last quarter, the event that definitely contributed heavily to this real crash was the collapse of Terra ecosystem and its stablecoin and consequently the failure of the hedge fund Three Arrows Capital.

Among the most interesting aspects highlighted in the report analyzing the market for cryptocurrencies, stablecoins, DeFi and NFTs is a denotation of how stablecoins fundamentally withstood the impact of the collapse of UST:

“In the report, we conduct a USDT redemption analysis, which suggests that Tether’s security structure is sustainable and will be able to handle severe stress tests, as it would be able to effectively convert its treasury balance into cash and meet significant redemptions.” .

DeFi and NFT also react poorly

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

The near-future scenario seems to be mainly related to macroeconomic factors, such as the inflation rate, which could have serious consequences for cryptocurrencies, as well as the dollar and Nasdaq prices, which seem to have created a ever closer correlation with the crypto market.

CryptoComapre’s analysis looks at Tetherits situation, which must initially use all cash positions to pay redemptions, and thereafter only US-T bonds will be used for redemptions.

The report continues as follows:

“Of course, this will be under extreme market conditions, where 10 – 30% of total USDT market value is redeemed within 7 – 30 days”.

CryptoCompare analysts say all signs point to a more prolonged period of distress for the DeFi sector in the coming months, with TVL expected to remain in the current range through 2022:

“Another challenge for DeFi protocols going forward will be their adherence to the ethos of decentralization, with a number of DeFi protocols exhibiting behaviors reminiscent of centralized entities – these are outlined in the table below.”