The year 2022 has seen most digital assets, like Bitcoin, Ethereum, and other cryptocurrencies, succumbing to the crypto winter, which started around June. The recent bear run wiped out almost all the gains recorded during the pandemic bull run. The price of bitcoin crashed from an all-time high of $68,000 to around $16,000 in a few months, and the story is not different for other crypto assets as they all experienced a dramatic drop in their value.
The effects of this unprecedented downturn in the crypto market have rippled through the digital world, causing financial distress for several businesses across various industries. This article will examine how crypto winter is impacting major digital industries and what the future holds for them. Below is the top five industries most affected by the crypto bear market.
- Crypto exchanges and brokerages
Crypto exchanges and brokerages are the most apparent digital industries affected by crypto winter. The value of most businesses in these sectors plummeted as investors continued to get their money out of the market. Some crypto exchanges have declared bankruptcy, some have frozen their customers’ assets, and others have terminated a significant percentage of their workforce to deal with this downturn in their business.
For example, Crypto.com, blockchain.com, and BlockFi slashed their workforce by 5%, 25%, and 20%, respectively, affecting hundreds of employees in their companies. Popular crypto platforms, such as Voyager Digital, Three Arrows Capital, and Celsius Network, have also declared bankruptcy during this period. Experts have suggested that these negative trends among crypto exchanges and brokerages may continue if the prices of cryptocurrencies continue to tumble.
- Crypto casinos
Although slightly affected, the impact of crypto winter is not enormous on the crypto gambling industry. The best crypto casinos have continued to weather through the storm, while only a few have bowed out. More crypto casinos have been launched during this period, suggesting that the industry may be recession-proof. Some gambling experts claim that the crypto crash has more pros than cons on crypto casinos.
First, they argued that the drastic drop in the prices of Bitcoin, Ethereum and other digital assets has made it more affordable, allowing the average gambler to get into action using cryptos. Second, the competitiveness in the gambling sector is expected to increase as more people key in due to the falling prices. Further, some experts have argued that the use of stablecoins in these casinos has made them less prone to the negative impact of crypto winter.
- Social media and online advertising
The bloodbath in the cryptocurrency market has forced several companies dealing with crypto assets to cut down on their ad spending. For instance, CNBC reported that Coinbase, one of the most popular crypto exchanges, cut its marketing expense by 46% in the third quarter of 2022. This pullback in ad spending, happening across the board, is hurting social media and online advertising, as businesses in this industry are left with a hole in their budget.
Recently, Google acknowledged that the current crypto bear run negatively affects its revenue growth. In the third quarter of 2022, the tech company recorded only 6% ad revenue growth, one of the lowest in ten years. Similarly, YouTube’s ad revenue has reduced during this period. This slow revenue growth is expected to continue as crypto advertisers spend less on ads. In addition, we don’t expect these trends to reverse soon, as most crypto businesses are not showing signs of scaling their advertising budgets.
- Digital finance
Another sector of the digital space that took a brutal hit as a result of the crypto winter is the digital finance industry, especially businesses dealing with crypto lending and investment. Following the crash of crypto prices, several investors took out their money. For example, billionaire Michael Saylor dumped about 3,000 bitcoins, worth about $62 million, in late June. The Bank of America also reported a significant drop in the number of its customers using cryptocurrency after the price crashed.
These dumps across the crypto market resulted in significant financial distress for businesses in this space, causing lenders like BlockFi and others to stop their credit card and loan operations. The future looks gloomy for digital finance companies unless there is a reversal in this downward movement of crypto prices.
The crypto winter affected several businesses in the digital space. Cryptocurrency exchanges and brokerages took the most hit, as the bloodbath saw several businesses downsizing their workforce, halting their operation, and some even declaring bankruptcy. Businesses, like Google and YouTube, in the online advertising industry were also indirectly affected by the crash as crypto companies spent less during the period.
However, the crypto gambling space is one of the few industries that seem to be weathering the storm. The price fall made cryptos more accessible to average gamblers, causing a spike in the number of people gambling with cryptos.