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Despite numerous unfortunate events shaking the crypto market in 2022, participants appear to have escaped the recurring fears of capitulation. While the first half of the new year offered some respite, there are still signs that the crypto winter hasn’t fully subsided.
Is Crypto Summer on the Horizon?
According to IntoTheBlock, the DeFi and NFT industries are wrestling with lower user engagement and a decline in trading activities. Historically, this could be an indication that a crypto summer might not be in the cards for this cycle. To put it simply, a crypto summer describes a bull phase in the cryptocurrency market, which could also bring increased adoption, a surge in altcoin prices, and a decrease in Bitcoin‘s (BTC) dominance.
Bitcoin dominance refers to the ratio of the leading coin’s market value to the overall crypto market capitalization. At press time, CoinMarketCap reported that dominance had risen to 48.11%, with Ethereum maintaining its 19.42% dominance. Most other altcoins with solid foundations primarily saw a decline.
During the 2020 crypto summer, numerous tokens under the Ethereum blockchain emerged as several altcoins performed better than Bitcoin. This led to the growth and adoption of DeFi protocols. Fast-forward to 2021, Ethereum became the first significant stop for NFTs, leading to a billion-dollar increase in volume and sales.
Ethereum Data!
Additionally, the combination of both factors played a crucial role as Ethereum’s Total Value Locked (TVL) reached $106.12 billion in November 2021. However, at the time of writing, Ethereum’s TVL had dropped to $24.97 billion. The TVL measures the value of assets locked in a distributed application (dApp) or DeFi protocol. Typically, a higher TVL could mean increased confidence in locking liquidity in smart contract projects.
Consequently, Ethereum’s decline in this metric could indicate that investors remain skeptical about the current market condition and the potential returns to be gained. Like TVL, an increase in Ethereum’s fees could also serve as an indicator of a crypto summer. However, these fees have been on a decline for some time now. This could point to a decrease in transactions on the blockchain compared to previous altcoin interaction surges. Therefore, block validator revenues have also been adversely affected.
