The recent cryptocurrency bear market has uprooted decentralized finance (DeFi) and centralized finance (CeFi) projects in the crypto space. But past performance is not always indicative of future results. For starters, Ethereum’s price has already recovered 48% in the past few days ahead of the looming Merge upgrade.

At the annual Ethereum Community Conference in Paris, Cointelegraph spoke to Skale Labs’ co-founder Konstantin Kladko regarding the market crisis. Sklae Labs is a decentralized network of blockchains built on Ethereum. Currently, it’s comprised of 28 blockchains where one can send tokens seamlessly from one chain to another. Here’s what Klado has to say about the recent contagion: 

“The market is acting this way because there is no regulation. So pretty much everything bad that happened on Wall Street like 100 years ago [during the 1929 Wall Street Crash] is happening on blockchain now. And unfortunately, while big players have the opportunity to leave silently when the market is doing bad, it’s often too late for the small players.”

As the bear market unraveled, it turned out that once-reputable projects in the blockchain space, such as Celsius and Three Arrows Capital, actually took enormous amounts of leverage with customers’ deposits to generate seemingly safe and consistent yields. Their forced liquidations and inability to pay back creditors, estimated to be in billions of dollars, then took the entire industry downhill. 

Kladko explained that while supposed “decentralized safeguards” are in place to protect investors, they often malfunction under…