Although the event already seems to be classified in the historical facts of the crypto ecosystem, the collapse of Terra is not done shaking the various sectors. A disaster whose shock wave can still deliver violent aftershocks in the coming months. With a definitely uneven impact depending on the affected areas. All this according to a principle summarized under the very explicit term “crypto-contagion”. But after almost three months of chronic instability, it seems high time to take stock of this accident. An exercise that the DappRadar structure observed in its latest report entitled: “The adoption of cryptocurrencies after the collapse of Terra and its contagion”. A whole program…
Regardless of what you think, the case of the Terra (LUNA) disaster is already an integral part of the short history of the cryptocurrency industry. To the point of being compared by some to the equally spectacular and dramatic bankruptcy of banking giant Lehman Brothers in 2008. With as a direct consequence a global economic crisis in the origin of Bitcoin’s birth. And in this case, the sudden and final loss of an amount estimated at more than $40 billion.
A turning point that can be clearly defined in terms of a boundary between a “before” and an “after”. And whose consequences are far from identical for all sectors of this very young digital economy and its derivative markets. A very instructive observation within this downtrend period, nevertheless in a full attempt at the summer technical rebound. Because according to the report provided by the DappRadar structure, this “coup exerted a strong pressure on the entire cryptocurrency market”. And all security victims are not necessarily to be pitied…
DeFi and NFTs – Top Collateral Damages
In its latest report, DappRadar Framework does some hard but necessary work. That is, identify and list the possible and visible consequences of the collapse of the Terra ecosystem, which occurred a few months ago. This is to measure the magnitude of this historic disaster. But also the strength of the resistance in the different sectors of this digital economy, in the face of the violence spread by this unprecedented shock wave.. And the least we can say is that not all areas suffer the same damage. To the point of seeing some of them do quite (very) well…
” When Terra — the second-largest DeFi ecosystem at the time — collapsed in May, it wiped out about $40 billion in venture capital and retail money. The move put a lot of pressure on the entire cryptocurrency market. Starting with Bitcoin and Ethereum, which had a ripple effect on the rest of the industry, also known as crypto contagion. Various parties have been hit as a result, with 3AC, BlockFi and Celsius in the spotlight. »
In fact, according to the figures presented by DappRadar, DeFi would undoubtedly be the big loser of this crisis. With total transactions – the metric at the heart of this analysis – down 14.8% since last May. This despite “total blockchain activity remaining relatively flat, with a 1% decrease in total transactions since the first quarter”. With cascading bankruptcies, as in the cases of Celsius, BlockFi or more recently the venture capital structure Three Arrows Capital (3AC).
With a more moderate decline for the NFTS sector of “only” 12.2% over the same period. But a market whose transaction volume shows -67% in the month of May alone. The most significant decline since its record rise started in 2021.
Metaverse and Crypto Gaming – Not even bad
Nevertheless, the inventory prepared by DappRadar has not only negative points. Some sectors are actually doing much better than DeFi and NFTs. And this is especially the case for the brand new trend represented by the metaverse.. These virtual universes are split between the voracious and centralized appetite of Meta and the more Web3 ambitions of players established in the cryptocurrency ecosystem. With a 97% increase for NFT projects related to the metaverse since the second quarter. But also crypto-gaming, currently very fashionable despite persistent opposition from some players. This “by posting increases of 27% and 9.51% each” which clearly makes the competition pale, swimming underwater.
” Blockchain gaming transactions defied the bear market, growing 9.51% since the first quarter. Investments in games and metaverse projects remain steady with $2.5 billion invested in the first and second quarters.”
With a special mention on crypto-gaming. Because even with a 7% drop in the average amount of Unique Active Wallet (UAW) activity, players continue to interact with their favorite games. And this “at about the same rate as before the Terra incident”. A commitment not to be taken lightly because it could well partially offset the effects of volatility “due to the non-speculative aspects of the games themselves”. A trend confirmed in July according to data from DappRadar.
” This bullish activity indicates that engagement with virtual worlds is not based on their profitability for the end user. This shows that virtual worlds are inherently fun for the end user as communities remain active despite native token devaluation”
A report from DappRadar points to the continued significant success of the game Axie Infinity (AXS, SLP), whose NFT collection is “the most searched in 112 countries”. And significant institutional investments in the blockchain gaming and metaverse sectors, underscoring the motivation of large companies in the field. Ecosystems that sometimes merge too quickly, but which represent “strong future growth potential”.