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Citibank: Crypto Market Volatility Hurts User Adoption
Citibank has released a report detailing how recent crypto market volatility has affected user adoption. The bank cites concerns about stablecoins following the collapse of UST as one of the main reasons for the decline in digital asset prices. The bank notes that while stablecoins were designed to provide a more stable alternative to traditional cryptocurrencies, recent events have called their stability into question.
The report goes on to say that, while there is still some interest in crypto assets from institutional investors, the overall uncertainty in the market is holding back many would-be adopters. This is likely to continue in the short term, but Citibank believes that there is potential for renewed growth once some of these issues have been resolved.
However, most are unwilling to enter the market until some of these issues have been resolved. In particular, they want to see greater regulation around stablecoins before committing any capital. If stablecoins can regain investor confidence, we could see an influx of new capital into the space.
It is no secret that cryptocurrency markets are volatile. Prices can (and do) swing wildly on a regular basis, and this volatility has undoubtedly had an impact on user adoption rates. When prices are crashing, it stands to reason that fewer people will be interested in buying or using cryptocurrency; conversely, when prices are rising rapidly, more people are likely to get involved.
This can be seen clearly by looking at trading volumes and active addresses. For example, around the time of the luna (LUNC) collapse, there was a significant spike in both of these metrics – which indicates increased user activity. However, since then, both numbers have reverted back to previous levels (or even lower). This suggests that while market volatility may affect short-term adoption rates, it is not necessarily indicative of long-term trends.
Ultimately, the Wall Street giant believes that user adoption will continue to grow regardless of any short-term volatility. This is because they believe that the underlying fundamentals – such as the technology and use cases – are strong enough to overcome any temporary bumps in the road. So while the markets may be unpredictable in the short term, it seems like cryptocurrencies will continue to see increasing usage over time.
It is clear that the cryptocurrency market has been through a lot of turmoil over the past year. After luna’s collapse, there were genuine concerns about outflows in USDT. However, these have since slowed down and some flows have even shifted to the more transparent and centralized USDC stablecoin. It does appear that some investors have decided to exit the market altogether.
As we move into the new year, it will be interesting to see how the market develops. Will we see more innovation and adoption of cryptocurrencies? Or will we see more regulation and government intervention? Only time will tell. But one thing is for sure, the cryptocurrency market is here to stay.
The total value locked in DeFi protocols has been stable when accounting for ether (ETH). This is due to the value lost in the Anchor protocol following the collapse of UST and LUNC. The loss of value in these two protocols accounted for the majority of the decline in TVL. However, when measured in terms of ETH, the total value locked in DeFi protocols has actually increased. This is due to the increase in ETH price over the past month.
This attributes this stability to a number of factors. First, there has been an influx of new users into the DeFi space who are not as familiar with how these protocols work. These new users are more likely to trade ETH for other assets, rather than holding ETH directly. Second, many existing DeFi users have switched from using ERC20 tokens to Ethereum’s native token, which is less volatile and easier to use. Finally, a number of large exchanges have launched products that allow users to trade directly between different cryptocurrencies without having to convert them into fiat currency first.