While the global cryptocurrency market has been hit hard by the recent Terra-Luna crash, it has also led to an uptick in new customer sign-ups and higher trading volumes for South African exchanges.
MyBroadband contacted local cryptocurrency platforms to learn more about how the market panic affected their operations.
Ovex CEO Jon Ovadia explained that investors are selling their stocks and shifting their money into bonds due to decreasing confidence in the US economy.
“These investors believe that the meagre returns that bonds promise might be better than potential losses they could incur by holding stocks (or crypto for that matter) into a recession.”
Ovadia said traditional markets and cryptocurrency face a recession, with Apple stock down by 11%, Amazon by 34%, and Netflix declining by 68%.
A slump in the cryptocurrency market brought on by this broader negative market sentiment turned into a rout when algorithmic stablecoin TerraUSD de-pegged from the US dollar.
The Luna Foundation Guard sold most of the $2.4 billion bitcoin reserve it built up to defend the TerraUSD peg.
However, despite their attempts to backstop Terra’s death spiral, UST failed to regain its peg to the US dollar.
Ovadia said that, fortunately, Ovex had no direct exposure to LUNA or UST.
“When things go pear-shaped, lessons are learned, and people build back harder. Bear markets are times when projects with little utility fail and those that can actually make a difference begin to shine,” said Ovadia.
Valr CEO Farzam Ehsani said that local exchanges with direct exposure to the assets that have seen the largest retracements, like LUNA and UST, have been affected more significantly than others.
Luno’s General Manager for Africa, Marius Reitz, stated that the current market’s negative state could signify “true market capitulation”, tempting investors to buy into crypto.
This sentiment was reflected in Luno’s 8% rise in new sign-ups and the 10% increase of first-time crypto buyers from 2 to 16 May.
“The lower prices may have been the impetus for those who were considering buying crypto for the first time to dip their toes into it,” he said.
Similarly, AltCoinTrader’s David Porter added that upticks in market volatility are usually followed by a trading volume increase due to the influx of “panic sellers” and “bargain hunters”.
“Longer-term investors (i.e. the hodlers) are less concerned with the short-term volatility as they have strong conviction in the long-term viability of their investments. However, the same cannot be said about the high-time-preference investors.”
“The effect on crypto exchanges such as ourselves has, by and large, been very positive over the short term,” he said.
Revix CEO Sean Sanders said that the assets they hold in custody on behalf of clients dropped proportionately to the crypto market’s decline last week.
Sanders said they also experienced their highest number of weekly deposits since the start of 2022, with trade volumes increasing to over 13 times the weekly average.
He noted that Revix’s increased trade volumes and deposits resulted from customers capitalising on “buying-the-dip”.
Sanders said the broader market decline has encouraged customers to move their funds into services like their Inflation Shield Bundle and USDC savings vaults.
Despite Terraform Labs’ plans to reconstitute the Terra blockchain, Sanders is doubtful that LUNA will ever regain its former glory.
“No matter the proposed route forward, it’s unlikely that Terra will achieve the levels of trust and credibility that it once had, which it would require to make it a top 20 cryptocurrency network contender again,” he said.