Modern Economic Nonsense — Crypto companies’ bankruptcy wave is healthy
Crypto markets are in a bearish trend with prices dropping continuously over the past few months. The market had been on a bull run for most of 2021, and sustaining such price increases is no longer possible. As prices drop, crypto companies that have kept their operations going by selling assets, or keeping afloat with venture capital, will get hit harder than others. Crypto companies with a sound business model and cash reserves can ride out the storm and continue operations when prices rebound. However, those without liquid assets or adequate operating capital may not be so lucky. Crypto companies going out of business is nothing new, but recently we’ve seen an unprecedented wave of bankruptcies as more and more businesses fail at an accelerated pace. Cryptocurrency has grown exponentially since its inception, making it extremely difficult for any company to stay afloat if they don’t have access to enough capital from outside investors or venture capitalists. Therefore, many crypto companies that can’t afford to keep operating once the bear market hits will eventually file for bankruptcy protection just like other industries do when they cannot pay back loans from outside investors anymore.
What is bankruptcy?
Bankruptcy is a legal process where a business creditor can get partial or complete ownership of the assets of the business in return for canceling all of the business’s outstanding debts. Each state has its own bankruptcy laws, and even if two parties file for bankruptcy at the same place and time, their bankruptcy proceedings can be very different. Bankruptcy is a process for relieving monetary distress. It does not give a company protection from creditors.
The current state of Crypto Companies and the bankruptcy wave
The cryptocurrency market fluctuates drastically, with some massive price swings. As the market went from bear to bull and back again, many investors lost all of their money. Now as the bear market continues, even more crypto companies are finding it difficult to survive. The cryptocurrency market is extremely volatile, which makes it very difficult for companies to operate and maintain their operations if prices drop significantly. As prices drop…