The excitement peaked in April last year when Coinbase, a cryptocurrency exchange, went public at an $85 billion valuation, a release night for the industry. Bitcoin surpassed $60,000 for the first time.
Last summer, El Salvador announced that it would become the first country to classify Bitcoin as legal tender, alongside the US dollar. The country’s president updated his Twitter profile picture to include laser eyes, a calling card of Bitcoin believers. The value of El Salvador’s $105 million investment in Bitcoin has been halved as the price has fallen.
Senators and mayors across the United States began touting the merits of cryptocurrency, as the industry spent heavily on lobbying. Mayor Eric Adams of New York, who was elected in November, said he would take his first three paychecks in Bitcoin. Senators Cynthia Lummis, Republican of Wyoming, and Kirsten Gillibrand, Democrat of New York, have proposed legislation that would create a regulatory framework for the industry, giving more authority to the Commodity Futures Trading Commission, an agency that commodity companies cryptography have openly courted.
Through the frenzy, celebrities fueled the fear of missing out, flogging their NFTs on talk shows and talking about blockchain projects on social media. This year, the Super Bowl featured four ads for crypto companies, including Matt Damon warning viewers that “fortune smiles on the brave.”
That blustering optimism waned this spring as the stock market crashed, inflation soared and layoffs hit the tech sector. Investors began to lose faith in their crypto investments, shifting money to less risky assets. Several high-profile projects have collapsed amid withdrawals. TerraForm Labs, which created TerraUSD, a so-called stablecoin, and Celsius, an experimental crypto bank, both collapsed, wiping out billions of value and sending the broader market into a tailspin.
“The circular flow of funds raises questions about whether this whole ecosystem still needs outsiders to come and support it,” Farrokhnia said.