With the recent collapses of cryptocurrency businesses like Terra Luna, Celsius, Voyager and Three Arrows Capital, is this a strong indication of a long term “crypto bear market” and what crypto-businesses in Australia are most vulnerable? 


Bear markets are generally defined as a period where supply is greater than demand, confidence in the market is low, and prices are falling (or in some instances collapsing). Pessimistic investors who believe prices will continue to fall are colloquially, referred to as “bears”. The reverse of this is effectively, and colloquially, known as a “bull”. That is, optimistic investors who believe prices will rise. 

Unlike ordinary stocks trading on a stock exchange, the crypto market differs in the sense that a dip of anywhere between five percent and thirty percent (and sometimes significantly more) can occur on any given day, without any obvious macroeconomic factors taking place. It can just as quickly “moon” – this is when there is a sudden surge in the market to the upside. 

So now that we have briefly outlined the meaning of a “bear market” in the context of the cryptocurrency markets, let’s have a look at which businesses are particularly vulnerable.


Salerno Law has identified the following businesses as particularly vulnerable:

  1. digital currency exchanges, which includes centralised digital currency exchanges (CEXs) and decentralised cryptocurrency exchanges (DEXs); 
  2. decentralised applications (Dapps) that utilise tokens as part of their governance structure; 
  3. businesses looking to raise funds as part of an initial coin offering (ICOs), initial decentralised exchange offerings (IDOs), seed round funding for a crypto project, including start-ups and decentralised autonomous organisations (DAOs); 
  4. investors (both retail and institutional) and conventional businesses who have been affected by their declining investments, loan defaults and the corollary effects thereof; 
  5. stake pool or node operators and “miners” that facilitate blockchain transactions and maintain distributed ledgers in return for “mining” and other rewards or incentives.


The rise of DeFi and lending platforms in the last two years has made for some very interesting financial news. The yields offered by some of these DeFi platforms can start from ten percent and in some cases reach over one hundred percent. Prior to the collapse of Celsius in early 2022, it was offering yields of up to eighteen percent on deposited crypto assets. Terra Luna (Luna) and the demand for its stable coin – Terra USD, was driven primarily because of a savings protocol called Anchor on Luna’s blockchain. Luna promised twenty percent in annual percentage yield. Luna’s value eventually plummeted from over $100 USD per Luna, to less than $0.005 in several days. 

Whilst many crypto assets have significantly declined since the “bull market” of 2021, there are a number that still hold significant value. Even with a sixty percent dip (and some a bit more) in the value of several “blue chip” assets, the market capitalisation is still in the tens of billions. 

Australian crypto businesses and projects reliant on crypto assets for funding rely also on consumer confidence in the markets. As the adage goes, the irony in fearful investor confidence is it usually becomes a self-fulfilling prophecy.  

In Australia, there is still some uncertainty about the legal character of crypto assets and how it should be classified. For example, a digitised picture that has been minted as a non-fungible token (NFT) with no utility other than it’s artistic value, differs significantly from an NFT that is to be used in a metaverse game.  

Further, the specific utility of the token or digital coin can make it difficult to determine whether it would be also classified as a financial product under sections 763B, 763C, 763D, and 764A of the Corporations Act 2001 (Cth) (the Act) which raises several other issues for crypto businesses. 

Regardless of their precise legal treatment under the Act, if Australia is to follow or be influenced by a string of international legal decisions, it is likely that cryptocurrencies will be treated as “property” or “data objects”, as was described in a proposal relating to digital assets from the Law Commission of England and Wales. The impacts of this classification are yet to be seen, though if it is classified as property in Australia, it raises interesting questions. For example, a “property right” may take different forms depending on the type of property. When the term “property” appears in legislation, without further definition, its content “then becomes a question of statutory or constitutional interpretation” (Yanner v Eaton (1999) 201 CLR). Consequently, the treatment of “digital land” (as a form of property), versus other digital assets like a jpg NFT (with very little utility) raise very interesting legal questions.  

There are also considerations in relation to the application of the Personal Property Securities Act 2009 (Cth) to digital assets. Businesses operating in this space should seek legal and financial advice in relation to the treatment of the various cryptocurrencies.


The crypto space is, for the most part, still unregulated in Australia. Unlike conventional financial products, the classification of cryptocurrencies is a grey area that requires a careful examination of the circumstances of every crypto business and venture.  Moreover, crypto assets involve a range of considerations beyond other asset classes and the representations made to “investors” may trigger other regulations under the Australian Consumer Law. 

Should you have any questions concerning the application of the Act or cryptocurrency questions generally, Salerno Law frequently provides advice to companies and individuals. Please contact, members of our Cryptocurrency Team, Matt Krog, and, Inoke Faletau for assistance. 

Salerno law has a dedicated cryptocurrency and financial services team with substantive knowledge on how to protect their client’s commercial position and interests. Should you have any questions in relation to financial services or cryptocurrency, please do hesitate to contact our team. Salerno Law strives for the best possible outcome for their clients by providing quality advice to companies and individuals in all practice areas.

Written by Inoke Faletau