TL;DR
- 2022 was a turbulent year for the crypto market.
- Traders suffer from market downfall and collapses of major exchanges and companies.
- There are still some positive developments that could spark a major uphill for the market in 2023.
Introduction
Crypto users have witnessed what could be the most challenging year in the cryptocurrency market. While traders are experiencing their worst nightmares with the downfall in the market and the collapse of significant exchanges and companies, there are still positive developments.
In this article, we will look at some of the major events happening in 2022 and give predictions for what could be coming in 2023.
2022 Recap
The Great Market Downfall
“Crypto winter” was probably the proper term to describe the crypto market in 2022. The total crypto market cap has fallen over 50%, evaporating over $2 trillion since the peak in November 2021.
This is partly because central banks around the world raise interest rates to fight inflation, causing investors to hold lower-risk investments to earn a higher and more stable yield. As a result, the crypto market entered a sell-off in the second quarter of 2022, with the market cap falling over $1 trillion.
Despite the optimistic predictions that Bitcoin will reach $100,000 by the end of 2022, the flagship cryptocurrency plunged over 60%, from $41,000 at the beginning of 2022 to just approximately $17,000 at the time of writing.
The rest of the crypto market also followed the path of Bitcoin. The second highest value cryptocurrency, Ethereum, decreased to $1,300 at the time of writing.
Terra Tumbles
One of the major events that sparked the crypto crash in 2022 was the terra tumbles. The UST stablecoin de-pegged from the USD on May 9. LUNA’s companion token fell over 96% in a single day, dropping from $80 to less than 10 cents on May 12. The Terra blockchain was halted for the second time on the same day.
Investors lost billions of dollars, and the entire crypto market witnessed one of the most significant downfalls ever. Three Arrow Capital and many other companies were forced to file for bankruptcy protection. Users could not withdraw their funds from these platforms, causing some people to lose their entire life savings.
Crypto During The War
The Russia-Ukraine conflict has shown the world the ability of blockchain and cryptocurrency, more specifically, how it can be a great help during a crisis.
After the Ukrainian government announced that it would accept cryptocurrency as international aid, over $100 million was raised to help the Ukrainian people and soldiers.
The cryptocurrency donation immediately proved one of the significant advantages of digital assets: speed. While traditional methods, such as bank transfers, could take several days to reach the account, cryptocurrency was deposited in just a few minutes.
In contrast to the upside of cryptocurrency, many governments also worry that the Russian government could use digital assets to avoid sanctions.
Because cryptocurrency is relatively new and lightly regulated worldwide, Russian organizations and oligarchs could use cryptocurrencies to evade sanctions. Since the beginning of the war, the exchange between Russian rubles into cryptocurrency has reached an all-time high as the ruble’s value decreased.
Ethereum moving to Proof-of-Stake
Ethereum moving from Proof-of-Work (PoW) to Proof-of-Stake (PoS) is the most significant development in the crypto sector in 2022.
Known as “The Merge,” the upgrade of the Ethereum blockchain network to Ethereum 2.0, replacing the energy-intensive PoW with an environmentally friendly PoS, marks a significant milestone in the entire crypto sector.
Proof of Stake is by far the most significant change in Ethereum 2.0. Previously, Ethereum ran on the PoW mechanism, which consumes a tremendous amount of energy to solve complex mathematical problems to mine the next block. Unlike PoW, with PoS, the staking process replaces mining for verifying transactions.
In December 2022, Ethereum ran on two blockchains, Ethereum Mainnet – a blockchain that operates using proof of work, and Beacon Chain, a new chain for proof of stake. The Merge combined the two blockchains into one, with the Beacon Chain as a proof of stake ledger on the Mainnet.
FTX’s Collapse
With everyone thinking that the crypto market could not get any worse, one of the largest crypto exchanges, FTX, was experiencing a severe liquidity crisis and could go bankrupt.
In 2021, it was revealed that Alameda’s investment foundation had invested in FTT, a token created by its sister company, causing concern in the market regarding undisclosed leverage and solvency of SBF’s companies. This raised questions about the potential conflict of interest between the two companies and led to scrutiny of Alameda’s investment decisions.
Immediately after the news, Binance announced that it would sell its entire positions in FTT, valued at approximately $529 million. The news got FTT’s price to fall more than 80% in just two days.
Later, on November 11, the company filed for bankruptcy, and its founder SBF stepped down. A domino effect also started, with companies with close ties to FTX, such as BlockFi declaring bankruptcy, Genesis Global Capital, and Gemini halted customer withdrawals.
Predictions For 2023
With 2022 already ending, 2023 is projected to be a massive year for cryptocurrency in terms of regulation and growth.
Market Recovery
The cryptocurrency market has previously displayed signs and patterns that a bull run follows a bear run such as consolidation and increased trading volume. There is rising optimism that the market will have a robust recovery in 2023 now that the worst of the bear market is believed to be behind us.
Web3’s adoption
Web3 technology has the potential to be the next big thing in the technology industry in 2023, with predictions that cryptocurrency and blockchain use will reach a new peak this year.
Web3 can potentially decentralize and democratize data and the power that centralized organizations previously controlled.
Regulation is on the rise
The more adopted crypto becomes, the more regulated it will be, especially with the previous events that shook the entire market to its knees. Governments worldwide will come up with new crypto regulations for their countries that may clash with the crypto community’s interest and threaten the crypto’s decentralization feature.
First Ever Spot Bitcoin ETF
Crypto investors believe that the first over spot Bitcoin ETF will be approved in 2023, giving investors direct exposure to the cryptocurrency. Thanks to the SEC’s proposal to expand the definition of “exchange” and the launch of ProShares’s Bitcoin Strategy ETF, analysts predict that a Bitcoin Spot ETF will be approved in 2023.
NFTs
The tremendous interest in NFTs in 2022 certainly will continue in 2023. Companies worldwide will follow in the footsteps of big companies like Nike and Meta to enter the NFTs market, emphasizing customer acquisition and engagement over monetization.
2023 is expected to be a pivotal year for the crypto industry, with significant events such as increased adoption and regulation on the horizon. Many forecasts have been made regarding what the year would bring for cryptocurrencies, providing a glimpse into possible outcomes for the industry. To take full advantage of any chances that 2023 may present, keep up with the most recent predictions in the cryptocurrency market.
Final Thoughts
Looking back at what could be one of the most turbulent years in the crypto market, there were both horrible and positive events. However, 2022 created some investment opportunities for long-term traders and could be a foundation for a year with significant changes to the entire crypto market.
