Crypto investors are a risk investor, but this bear market doesn’t feel like an existential dream

The major swoon earlier this year has a silver lining that could be beneficial for other risk investors, and the 2022 hasn't been kind to them.

According to Coinmarketcap, the total market value of cryptocurrencies dropped by more than half - 56% in the second quarter after a widespread sell off in Q 1, according to Coinmarketcap. Since July, the total market value of the digital currency has gone up 7%.

Thomas Dunleavy, senior market analyst with Messari, said we may have hit the ultimate bottom months ago because of cascading liquidations. Only the true believers are in the market at this point. Most of the sellers seemed to have left. With the rise of interest rates by central banks, cryptocurrencies are being de-leveraged in a big way starting in May with the collapse of the $40 billion Terra ecosystem followed by the Three Arrows Capital, Voyager, Celsius and others. FTX's affiliated trading company, Alameda Research, resigned, including Genesis Trading CEO Jesse Powell, Kraken's CEO Jesse Powell and Sam Trabucco.

The CEO of the Celsius Network, Alex Mashinsky, left his position, citing that he regretted that his continued role during the firm's bankruptcy had become an increasing distraction. In Q 3, Bitcoins were little changed 1%, while the S&P 500 GSPC fell 4%, and the Dow DJI fell 5.4% as of market close Friday.

The asset class could continue to push coin as a leading indicator of how much risk investors are taking, even though it hasn't proven to be an inflation hedge that promoters said it was.

Farrell said that a good lead indicator is always a good indicator of a good rally in cryptocurrencies.

VanEck's portfolio manager Pranav Kanade said that the performance of the current bear market does not feel as existential as previous rough patches.

In the 2018 to 2019 bear market, it was not clear that the space would survive, according to Kanade. During the drawdown from the market peak in December, there is a feeling of inevitability in the ecosystem. Kanade said that he believes that if you invest incryptocurrencies, it depends on whether you can attract more users to the different blockchains. He explained that there are about 2.5 million daily users of the digital ledgers that need to scale their throughput transactions per second, making up less than 50 basis points of all global assets. There are more than 4 billion people with smartphones. For market caps to grow, daily active users need to grow. The market has interpreted the move in the right direction, despite the fact thatEthereum's Merge upgrade did nothing for scaling throughput.

Since July, the price of ETHUSD has gone up 26% from $1,057 on July 1 to $1,339 Friday afternoon, beating the performance of the other asset,Bitcoin.

Now we know how a lot of these chains likeCoina, Solana orEthereum are going to do it, so it's just a race to get there first, according to Kanade.

David Hollerith is a senior reporter at Yahoo Finance. He covers the criptocurrency and stock markets.