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Editor鈥檚 note: Mergers & Money is a monthly column by Senior Reporter Chris Metinko that covers dealmaking and the flow of venture capital.

Things are so bad in the crypto world right now that even when the industry gets a small taste of good news, it鈥檚 followed by a heaping spoonful of real-life medicine.

It was just last week when much of the crypto world celebrated a 鈥攕ponsored by Sens. , R-Wyo., and Kirsten Gillibrand, D-NY鈥攚hich seemed to put new regulations on the digital assets space that many in the industry supported.

This week, that celebration turned to dread as Bitcoin鈥攖he largest cryptocurrency by market cap鈥�hit a new 18-month low, tanking all of crypto鈥檚 total market cap below $1 trillion. The market instability even caused a major lending platform to halt withdrawals.

Such a week basically sums up crypto鈥檚 2022 so far.

A modest proposal

The Senate proposal鈥檚 main takeaway is that it will categorize crypto as a commodity and under the purview of the 鈥攏ot the and its chair, , who has and offered skepticism about the digital asset market.

鈥淭he bipartisan legislation announced today by Senators Lummis and Gillibrand represents a milestone moment for crypto policy and a major step forward for the crypto industry in Washington,鈥� said , executive director of the nonprofit trade group , in a statement. 鈥淕ood policy is the result of good debate and good discussion.鈥�

While the bill is just a proposal, it seemed cheered by an industry that knew some form of regulation was coming.

Price drops and asset freezing

Now it鈥檚 fair to wonder if that proposal was announced this week, would it be different?

Let鈥檚 get to crypto鈥檚 greatest hits this week alone:

• Bitcoin鈥攖he largest cryptocurrency by market cap鈥攊s down about 58% in the last six months, while Ether鈥攖he second largest鈥攊s down a staggering 73%.
• The 鈥溾�� made crypto lending platform suspend withdrawals, swaps and transfers. The company pays interest on crypto deposits and loans it out for return, allowing users to bypass more traditional banks.
• That was followed on Monday by , the world鈥檚 largest cryptocurrency exchange by trading volume, saying it is temporarily pausing Bitcoin withdrawals 鈥�.鈥� However, the company later blamed 鈥溾�� for the pause, not market conditions.

That type of market volatility and freezing鈥攁lbeit in Binance鈥檚 case temporarily鈥攐f people鈥檚 assets is sure to not just catch the attention of regulators, but also politicians, as the government makes a point to look more closely at the crypto industry.

It was just in March when President signed his long-awaited on crypto that seemingly stayed away from regulation and instead asked agencies to offer recommendations and quicken their own reviews of crypto.

While most of the talk about the proposed bill has been about categorizing crypto as a commodity and keeping it away from the SEC, the proposal also seems to address another very recent collapse in the crypto market that grabbed headlines everywhere.

The proposal requires stablecoin issuers to maintain reserves that back their digital asset鈥攚hich seems to speak directly to the recent TerraUSD debacle and its fallout last month.

The proposed requirement would seem to affect algorithmic stablecoins鈥攕uch as TerraUSD鈥攚hich use financial engineering to maintain their 1-to-1 peg between itself and its backup assets.

Without TerraUSD鈥檚 collapse, it鈥檚 fair to ponder if such a provision would have been in the proposal? Now, as this week鈥檚 events brought the industry under an even greater microscope, might more additions or changes be made to the bill?

Those are fair questions. This emerging crypto winter is now starting to affect not just people who choose freely to invest in digital assets, but those who are employed鈥攐r at least were鈥攊n the industry.

On Monday, crypto lender said it is cutting .

The next day, crypto exchange announced it is laying off about 1,100 employees as its shares get battered in the public market. In an email to employees about the layoffs, CEO pointed directly to how past crypto winters have led to a decrease in trading.

鈥淲e appear to be entering a recession after a 10+ year economic boom,鈥� he said. 鈥淎 recession could lead to another crypto winter, and could last for an extended period.鈥�

Bundle up.

Further reading:

• Crypto Market Tumult Drops Bitcoin To 18-Month Low
• Crypto Bear Market Here A While
• Mergers & Money: The Instability Of Stablecoins

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