DappRadar analysts compared the impact of the FUD attack on Terra to the subprime mortgage crisis. In their opinion, the effect of the Terraform Labs projects collapse on the cryptocurrency market is comparable to the bankruptcy of Lehman Brothers, which became one of the triggers of the global financial markets crash in 2008.
The devaluation of Terra projects caused destabilization of the entire crypto sector and undermined investor confidence in the industry. This is the opinion formulated in the report by DappRadar.
According to the report, the Terra collapse and the failed attempts of Luna Foundation Guard (LFG) to hold the UST rate caused the loss of about $40 billion of venture and private capital. Such a blow put a lot of pressure on the entire cryptocurrency market, in particular becoming one of the main reasons for BTC’s fall. As a result, the decentralized finance (DeFi) market cap dropped 74.6% in Q2 2022, and 72 major cryptocurrencies by capitalization lost more than 90% of their maximum value.
Nevertheless, the report indicates that GameFi and metaverse sector projects coped with the crisis better than others. While the number of unique active wallets (UAW) in the NFT market fell 24% in Q2 2022, blockchain games registered a decline of only 7% in the same indicator.
Despite the severe blow to the industry, the blockchain games and metaverse sectors held investor confidence, receiving $2.5 billion in investment in Q1 and Q2 2022. According to DappRadar, the GameFi market even showed 9.5% growth in Q2 2022, and the number of transactions in metaverse projects grew by 27%.
Such figures give rise to optimistic forecasts for the development of the virtual real estate market. Thus, the analysts of Technavio suggested that the annual growth rate of the metaverse sector may exceed 60% in the next four years. McKinsey & Company analysts said that the yield of metaverse projects in eight years might exceed $5 trillion.
The DappRadar report also points out that the destabilization of some stablecoins after the FUD attack on Terra attracted the close attention of global regulators to the cryptocurrency market. So, in early July, the European Parliament pre-approved the Markets in Crypto-Assets (MiCA) bill, designed to introduce restrictions on unsecured cryptocurrencies and stablecoins. The United States, Vietnam, Georgia, South Korea, Germany, South Africa, the United Kingdom and many other countries are actively developing regulatory frameworks for the cryptocurrency market this year.
