In this explainer, Chris Haroun attributes the recent cryptocurrency market downturn to a "perfect storm" of three interrelated forces. First, soaring energy prices—driven by geopolitical tensions such as the Russia‑Ukraine conflict—have made crypto mining less profitable, reducing miner incentives worldwide. Second, rising interest rates have shifted investor appetite toward risk‑free assets like U.S. Treasury bonds, which now offer around 9.6% guaranteed returns, leaving riskier assets such as crypto less attractive. Third, liquidity and withdrawal restrictions at major crypto trading platforms, exemplified by Coinbase’s recent 18% workforce reduction and its $1.2 billion convertible debt issuance, have heightened market stress and eroded confidence. Haroun points viewers to his website for deeper dives on Coinbase’s convertible debt and broader crypto market dynamics.
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What happened to the cryptocurrency market and is it likely to go lower? Yeah. So what's happening with cryptos now is the perfect storm, okay? Like that old George Clooney movie with the waves. The perfect storm is, on the one hand, energy prices are up materially because of Russia and cryptocurrency miners like to mine, and they mine more if energy prices are lower. So there's not much of an incentive to mine cryptocurrencies right now in many parts of the world. Number two, interest rates are rising. And whenever interest rates rise, then lower quality or riskier asset classes get hit quite hard. And so if you go back to the early 1980s when interest rates were close to 20%, nobody bought stocks, nobody invested in venture capital, hardly anybody, hardly anybody bought property. They just put their money in the bank or bought government bonds because that was basically risk free. And so it's kind of like that today because rates are going up, people are investing more money in bonds, right? It's risk free. As I showed you earlier, you can make 9.62% guaranteed if you live in the United States and you buy treasury bonds, okay? Savings bonds. So if I tell you you're guaranteed to make 10% guaranteed with no risk, you're probably going to buy fewer risky assets like cryptocurrencies. And to make matters worse, a third negative reason why or third reason why crypto is getting hit hard is you have some cryptocurrency trading companies that are putting up gates and they're not letting you take your money out, okay? And people think, oh my God, that's not fair. It's against the law. Well, what happens is when you sign up to use these cryptocurrency platforms, when or when you invest in certain large hedge funds, you click I agree to everything or you sign the paperwork, the subscription documents for hedge fund and written in those contracts is stipulation that they can stop you from taking money out if volatility is too extreme. Also, Coinbase ticker C O I N what they did was they just announced they're letting go 1100 people, which is 18% of their workforce. And they just went public a year and a half ago. And if anybody's interested in learning more about Coinbase and their convertible debt offering, what you can do is you type Coinbase here on my website haroon mba.com and then you click here and you can watch this video here on Coinbase's 1.2. Let me pause that. 1.2 billion dollar convertible debt issuance. I published this a year ago, and basically I was talking about how Coinbase was raising a ton of money and they just went public. Well, you want to raise as much money as you can when you can. And I talk about what a convertible debt is right here. To learn more about convertible debts, you can watch that video there.
