The cryptocurrency Markets had a tumultuous year in 2022 as of the article’s writing. These can be marked by significant price declines and major scandals that shook the industry. After experiencing a strong rebound in 2021 following a three-year bear market, the cryptocurrency market saw values drop significantly in 2022.
The price of Bitcoin, for example, fell by more than 60% from around $50,000 at the end of 2021 to about $17,500 at the end of 2022. This decline was reflected in other popular cryptocurrencies, with some, such as Solana, seeing their unit price drop by a factor of 10.
The market capitalization of the entire cryptocurrency market also saw a significant decrease, dropping from around $2,400 billion at the end of 2021 to about $830 billion at the end of 2022. In this retrospective, we will explore the main factors that contributed to the challenging year for cryptocurrency and take a closer look at some of the major events that shaped the industry in 2022, including the COVID bubble partially bursting, the struggle of NFTs, and the FTX scandal.
The COVID Bubble Partially Bursts
After a successful rebound in 2021 following a three-year bear market, the cryptocurrency market experienced a challenging year in 2022. The market saw a significant decline in value, with the price of Bitcoin falling by more than 60% from around $50,000 at the end of 2021 to about $17,500 at the end of 2022.
This decline was reflected in other popular cryptocurrencies, with some, such as Solana, seeing their unit price drop by a factor of 10. The market capitalization of the entire cryptocurrency market also saw a significant decrease, dropping from around $2,400 billion at the end of 2021 to about $830 billion at the end of 2022.
Many experts attribute the decline in cryptocurrency values to the tightening of monetary policies and the rise in interest rates following the COVID-19 pandemic. The market was also affected by inflation and the ongoing conflict in Ukraine.
NFTs Struggle
The catastrophic collapse of the Terra blockchain token, LUNA, in May of 2022 also hit the cryptocurrency market. The token, which had a market capitalization of almost $30 billion at the time, saw its value drop from around $85 on May 5 to almost nothing just a week later.
The cause of this dramatic decline is believed to be an attack on the algorithmic stablecoin UST, leading to its depeg from the dollar. The loss resulting from the collapse of the Terra ecosystem is estimated to be around $60 billion, contributing to the slow descent of the cryptocurrency market into a new bear market.
The FTX Scandal
The year ended on a sour note with the FTX scandal, in which the second-largest cryptocurrency exchange declared bankruptcy on November 11. It was later revealed that the company had been selling fake Bitcoins, mixing its clients’ funds with those of its sister company, Alameda Research, and even speculating with the combined funds. This illegal activity could potentially affect many customers, with nearly one million people at risk of losing their funds on the platform.
The repercussions of the FTX scandal were felt throughout the industry, with the BlockFi lender, which was closely linked to the company, also going bankrupt. Rumors of a possible investigation for money laundering by the US government also affected Binance, leading to a withdrawal of around $3.6 billion from the exchange in one week.
What to say is that for 2023, it will undoubtedly be difficult to perform worse. Even though, of course, we are used to surprises thanks to cryptocurrencies!