On Monday 9 May 2022, the crypto market crashed, wiping out billions of dollars of long positions on major exchanges.
In the previous week, Bitcoin shed almost 12%, with the massive drop coming just a day after the Federal Reserve’s rate hike announcement caused stirrings in the tradFi stock market.
Rather than abating, the dump continued, and on Monday, Bitcoin tumbled to a low of $29,945 before slightly bouncing back above the key $30k level as buyers stepped in for one of the tastiest dip buys for over a year.
In all, in the space of just 6 days, almost half a trillion dollars of value was wiped off the market cap of the worlds’ cryptocurrencies.
Calling the fall almost perfectly was TikTok crypto influencer Wendy O (@cryptowendyo), who just four days prior projected further downside volatility and expected Bitcoin to find support around the $30,000 level.
Naturally, when Bitcoin’s price is shaken, the Altcoins tend to follow suit, and this crypto market crash did not buck that trend.
Ethereum shed around 10% in just a few hours, dropping down to $2208, and almost all of the top 20 coins are down between 15% to 25% over the preceding week.
The bad news didn’t end there, though. Within a few hours of the 9 May crypto crash, Terra’s UST stablecoin dramatically lost it’s peg, falling to a low of just $0.66 and forcing the Luna Foundation Guard (LFG) to announce it had lent $1.5 billion in Bitcoin and UST in order to defend the algorithmic stablecoin’s peg, but even so, it hasn’t managed to find its way back to $1 as of the time of writing.
In a further cruel twist of fate, the DeFi lending platform Fortress fell to an Oracle price manipulation attack, allowing an attacker to drain the protocol of virtually its entire reserves of ETH and DAI.
All in all, it’s fair to say that 9 May 2022 is going to be one of those days that will probably go down somewhere in the annals of crypto-history.
However, long-term hodlers aren’t strangers to devastating volatility, and in fact, this by far wasn’t the worst red day we’ve ever seen.
In a single month starting in January 2018, Bitcoin lost over 65% of its value after a colossal run up at the back end of 2017, and by the end of that year had given up over 85% of its gains.
And let’s not forget the massive 99% loss of value back in June 2011 caused by the Mt Gox hack, or the 50% drop as even Bitcoin contracted Covid back in March 2020. Then there was a 45% drop which occurred over the space of just 9 days in May 2021.
And these are just a small selection of the large dumps we’ve seen over the last few years. Everyone expects them, but even so, there are plenty of crypto holders running around like their hair is on fire today.
The point is that when the crypto market crashes, as it does with alarming frequency, the fallout can be disastrous for both retail and institutional investors, and whenever it happens, the self-declared sages of crypto are often heard opining the hard truth that volatility is both a feature and a bug of cryptocurrency.
Fortunately, a solution is coming very soon.
The Bumper protocol is a unique and innovative DeFi solution designed to provide protection from crypto market crashes, and is the first of its kind to solve the problem of downside volatility, whilst maintaining the upside should the market rebound.
Although the protocol, which refers to itself as ‘God Mode for Crypto’ has yet to be released (it is scheduled to be live very soon), Bumper would have dramatically improved the day of anyone who’d taken out its novel price protection.
Looking at this year alone, if a user had taken out 30-day price protection on the 10th April 2022 when ETH was sitting at a very respectable $3295, and closed their position today after the great May 2022 crypto crash, they could have saved themselves over $920 per token.
The following table shows how much value would have been retained purely for taking out Bumper’s price protection on Ethereum (ETH):
We can only speculate as to how much value would have been saved had Bumper been live during this period, but one thing is for certain… this won’t be the last crypto crash. Others will follow, of that you can be absolutely sure!
Perhaps next time you could be one of those doing a happy dance, knowing that you found out about Bumper early, and not only protected your crypto, but were able to earn BUMP token rewards for keeping your crypto value intact.
Want to learn more about Bumper and how to stop volatility from spoiling your day?
For a simple overview, read the Bumper Flashpaper, or join the Discord community here.
Disclaimer:
Any information provided on this website/publication is for general information purposes only, and does not constitute investment advice, financial advice, trading advice, recommendations, or any form of solicitation. No reliance can be placed on any information, content, or material stated on this website/publication. Accordingly, you must verify all information independently before utilising the Bumper protocol, and all decisions based on any information are your sole responsibility, and we shall have no liability for such decisions. Conduct your own due diligence and consult your financial advisor before making any investment decisions. Visit our website for full terms and conditions.
In this article, we compare using Bumper with Put Options and examine its advantages for DeFi traders wanting to trade volatility with more flexibility.
