Layer by Layer Issue 30: Terra

Crypto markets remain embroiled in a battle for stability as the total market cap of cryptocurrencies continues to shrink alongside traditional equities. As of this writing, crypto’s market cap has fallen to $1.46T, reaching a low last visited in July 2021. The price of Bitcoin is now down about 31.8% since the beginning of the year and down about 55% from its peak in November.

This market uncertainty and the associated large price movements have contributed to a general decline in on-chain activity, stifling user appetite for risk and demand for leverage. On the Ethereum-native lending protocol, Compound, outstanding debt has fallen from a peak of over $9 billion in September 2021 to about $1.8 billion as of this writing, reflecting the shrinking user interest in accessing on-chain leverage.