Recent Crypto Platform Hacks Exacerbated Fallout of “Crypto Winter”

Over the past weeks, the casualties of the crypto winter that devastated prices mounted. Crypto lenders and platforms Voyager (VYGVQ) and Celsius (CELUSD) filed for bankruptcies after limiting customer withdrawals. Crypto hedge fund 3AC was also hit hard, and latecomers that purchased cryptocurrencies on the way to the record highs in late 2021 were the victims of their hopelessness again.

Furthermore, the crypto winter also purged the weakest players. Shares of the leading publicly traded crypto platform, Coinbase (COIN), fell to a low in mid-May before Bitcoin and Ethereum reached their June bottoms, although later they somewhat rebounded from their anemic lows.

In fact, COIN's precipitous plunge from $429.54 since April 14, 2021, the day the NASDAQ listed the shares, to a low of $40.83 on May 12, represented a 90.5% drop. COIN was at the $89.33 level on August 4, as the shares more than doubled from the mid-May low.

But let’s make no mistake: markets also hugely reflect the economic and geopolitical landscapes. The Fed's commitment to addressing the highest inflation with Fed Fund Rate hikes and quantitative tightening to reduce its swollen balance sheet may have run into trouble after U.S. GDP declined for the second consecutive quarter in Q2 2022. The textbook definition of a recession is two successive quarterly GDP declines. Since geopolitical tensions in Eastern Europe show no signs of abating, the broad rollback looks more and more unresolvable in the meantime.

Many investors remain extremely cautious about holding cryptocurrencies in hot wallets, while there aren’t many trusted cold wallets apart from Ledger Nano. The recent bankruptcies and the last week's hack of Solana (SOLUSD), the 9th-most capitalized cryptocurrency with an over $13.4 billion market cap, only exacerbates the precarious situation. While the most direct route for a risk position in the cryptocurrency arena is via purchasing tokens, the Bitwise Crypto Industry Innovators ETF product (BITQ) would be an interesting alternative as it holds shares in crypto-related companies that tend to move higher and lower with the asset class's market caps.