2022 has been eventful! What lies ahead for crypto remains unpredictable after the unparalleled incidents, from war to the end of the pandemic. Markets have also been turbulent following the harsh reactions to exchange collapses and a prolonged crypto winter.
Here’s a 2022 crypto market recap: events that have shaped the crypto conversation in 2022.
When economic uncertainty caused investors to sell risky assets, the cryptocurrency market, which had reached a height of close to $3 trillion in November, quickly reversed course. Following the initial losses, investors liquidated excessively leveraged crypto positions (investments financed with loans), resulting in further decline.
Regrettably, retail traders were not the only ones making dangerous wagers. To generate income, cryptocurrency lender Celsius frequently paid double-digit interest rates on deposits of Bitcoin (BTC) and Ethereum. As the cryptocurrency market crashed in June, Celsius froze withdrawals, escalating concern in an already dangerous situation.
Terra’s algorithmic stablecoin lost its peg following a supply spike earlier in the year. The stop-gap measure expected to kick in (a Bitcoin reserve) failed to secure TerraUSD. Instead, the stablecoin’s price fell as frightened investors increased their selling. Investors dumped Luna since the arbitrage mechanism would have to drastically raise the stablecoin’s supply (and decrease its value) to restore the peg. With no recovery option, LUNA fell, and the market felt it.
Like a tsunami, LUNA’s downfall ripple effect caught up with 3AC. Over its four-year operation, the Terra network and its founder, Do Kwon, became an almost cult-like figure in crypto, but everything ended catastrophically. With an estimated $60 billion wipe-out, the Terra crypto network crashed in a disastrous fall, shattering the global market for digital currencies.
Investors wrote off what once appeared to be the next big thing in technology due to the bankruptcy of the crypto behemoth FTX and the resignation of its founder, Sam Bankman-Fried. Such a collapse meant unsavoury ripple effects in the complex world of cryptocurrency. FTX’s failure could trigger new crypto laws and tighter regulations for cryptocurrency operations.
The second-most valuable cryptocurrency in the world, Ethereum, underwent a software upgrade to increase its protocol security while reducing its carbon impact.
Ethereum’s redesigned system, dubbed The Merge, will affect miners and massive mining farms, who previously powered the blockchain via Proof of Work (PoW). In its place, the Proof of Stake (PoS) mechanism was adopted, which randomly selects validators to approve transactions for a modest payment.
Embracing PoS negates miner services, drastically reducing Ethereum’s global power consumption. The move, though (largely) inspired by Ethereum’s desire to improve its efficiency, signifies an acceptance of green crypto. It could encourage more environmental policies from cryptos and a positive market reaction, despite ETH prices remaining flat following the successful merger.
For breaking sanctions, the US Treasury has imposed on people in various nations globally, the Bittrex exchange received a $24 million fine. The US Treasury claims Bittrex did not prevent people under sanctions from Cuba, Crimea, Iran, Syria, and Sudan from using the exchange.
Between March 2014 and December 2017, Bittrex allegedly violated the laws on money laundering by allowing 1,730 people on the sanctioned individuals’ list from the Office of Foreign Assets Control (OFAC) to trade on their platform. These individuals executed ~116,421 transactions involving digital assets worth about $263.4M.
Bittrex is not the first firm to receive a fine for violating laws; however, its penalty is record-breaking (the highest crypto fine).
Want to explore where some of the hacked Bittrex Bitcoin went? Here’s an in-depth look at the couple accused of laundering 94,636 Bitcoin from the 2016 Bitfinex Hack.
According to a Chainalysis report the rate of Bitcoin adoption worldwide peaked in Q2 2021. Since then, adoption has fluctuated in waves. It decreased in Q3 following the crypto price fall, increased in Q4 when the cryptocurrency prices reached new all-time highs, and has since decreased in each of the past two quarters as the market has entered a bear market. It’s crucial to remember that global usage is still significantly higher compared to the pre-bull market years.
Users drawn by growing prices in 2020 and 2021 persisted and continued to invest a sizeable portion of their assets in digital assets. Large, long-term cryptocurrency investors have held on throughout the bear market; though their portfolios have lost value, those losses have not yet been locked in because they haven’t sold. The trend suggests these investors are confident the market will recover, which keeps market fundamentals in decent shape.
Countries continue to adopt Bitcoin as legal tender, as it became the official currency in the Central African Republic. Despite the winter, state nations and institutional adoption of Bitcoin remains greater than ever,
A look back at the events that transpired in our 2022 crypto market recap painted a bleak picture for the industry; however, there’s hope over the horizon as crypto faithful continue building and the user base expands into new markets. Despite the setbacks, the community remains persistent and full of hope. Builders are continuing to build, and innovation will remain fervent. For all of 2022’s chaos, 2023 promises to be encouraging.
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