Between a dizzying price drop, the failure of NFTs and bankruptcies by the shovel, the year 2022 has not been easy for crypto professionals. Nothing says that the situation will improve in 2023.
2022, the year of the debacle for cryptocurrencies. After years 2020 and 2021 which saw records accumulate and crypto become a mainstream subject, at the end of 2022, it is clear that the past months have been an ordeal for the entire sector.
It has certainly not been all bad news: some technological advances and other legislative projects are rather positive for businesses and individuals. But what history will remember from 2022 is above all the catastrophic chain of bankruptcies, which did not spare the big names in crypto.
The “bear market”, the fall in the price of bitcoin and the entire market
On January 1, 2022, one bitcoin was worth $46,311, according to Coinmarketcap data. As of December 23, 2022, one bitcoin is only worth $16,845. An impressive drop of more than 63% in value (a drop almost as big as Tesla stock) that had side effects throughout the year on the entire crypto industry.
Bitcoin is not the only one to have experienced such a difficult decline: the whole sector has collapsed. While the market was valued at $2.5 trillion, it is currently worth less than $1 trillion, according to data from Bloomberg. It’s the whole sector that’s in crisis, and that’s what we call a ” bear market “.
The drop in values is as impressive as it was to be expected, according to some observers. The bear markets tend to arrive after peak periods (such as in 2021), when central banks raise their key rates, or when there are periods of global instability (which may be due, among other things, to epidemics (the Covid-19) or conflicts (the war in Ukraine). All of these elements have contributed to the impressive and constant erosion of prices in 2022 – and this price drop has itself had direct consequences on almost all events. described by Numerama in this article.
The Collapse of NFTs
While in 2021 NFTs traded for millions of dollars, in 2022 the sales of non fungible tokens have simply collapsed.
Data from The Block show it very clearly: the NFT market is in the midst of a crisis. The latter is partly due to bear market current, but we must not overlook the fact that tokens are, in part, out of fashion. The early speculative bubble that was so disgusting has finally burst, and most of the useless (even, let’s say it, crappy) projects no longer find takers, which is good news.
But is there room in the future for “useful” NFTs? Not sure. The other major market in which tokens would have had a role to play, the metaverse, is also in crisis. These virtual spaces are struggling to convince, do not attract crowds, and have already lost a lot of money – the metaverse is also taking 1st place in our 2022 flops. It is not the metaverses that will save the NFTs.
Terra’s Crash
This is arguably one of the biggest stories of 2022: In May, a dollar-pegged stablecoin named Terra completely collapsed within days. While the project was the 3rd largest stablecoin on the market in terms of valuation, following a panic, the Terra lost all its value, and took with it its sister cryptocurrency, Luna, in ruin. The entire ecosystem of companies that had been built on its blockchain collapsed with Terra.
An impressive crash that destroyed more than 50 billion dollars in value, and which is now worth Do Kwon, the founder of Terra, to be wanted by Interpol. The collapse of Terra also had repercussions throughout the medium, and was only the first of a long list of projects that disappeared in 2022.
Endless bankruptcies and layoffs
This is undoubtedly what we will remember from this year 2022: the impressive number of bankruptcies. Some are partly due to the crash of Terra, but others have simply taken place because of poor market health, bad investment choices, or even because of disastrous management.
It would be difficult to make a complete summary of all the companies that have gone out of business in recent months, but we will retain the most notable here. Crypto lending platform Celsius was another Terra casualty in July, along with Voyager Capital. Investment fund 3 Arrows Capital was the first to bear the brunt of Terra’s downfall, filing for bankruptcy in June, followed in July by crypto lending platform Celsius and industry giants Voyager Capital.
Finally, in November, it was the bankruptcy of FTX that shook the market. The crypto exchange, until then the 2nd largest in the world, declared bankruptcy following the discovery of mismanagement of funds by its CEO, Sam Bankman-Fried. FTX went from a valuation of $32 billion to almost nothing in a matter of days, leaving a large number of clients on the chopping block.
In addition to all these bankruptcies, it is important to note that very many companies have announced layoffs in order to reduce costs. Among the most significant, Coinbase, which parted ways with 1,100 employees, Kraken, who has sacked 30% of its payrollor the layoff plans of crypto.com, Gemini, BitMex, BlockFi, 2TM… The list is still long.
The Merge, the Ethereum revolution
Certainly the best news of this year for the whole industry: The Merge. The event, which took place on September 15, was a real technical feat in addition to being a revolution for the Ethereum blockchain.
Simply put, the Ethereum blockchain has changed the way it works, moving from a so-called “proof of work” protocol to a “proof of stake” protocol. . The consequences of such a change are very important on the overall electricity consumption of Ethereum: with the proof of stake, more mining farms, these huge groups of computers responsible for carrying out the calculations necessary for the production of new blocks. Since The Merge, the blockchain therefore consumes much less energy, and it continues to work very well. And that is good news.
Calls for bitcoin donations to support Ukraine
Russia’s invasion of Ukraine has impacted cryptocurrencies globally. But it wasn’t all negative. On February 26, two days after the start of the Russian offensive, Mykhailo Fedorov, the Deputy Prime Minister and Minister of Digital Transformation, announced that the country was accepting bitcoin donations.
Thanks to that, the country would have received more than 54 million donations in cryptocurrencies in a few days—donations that would have allowed him to buy equipment and weapons to face Russia.
The Central African Republic has made bitcoin an official currency
In April, the Central African Republic recognized bitcoin as its official currency, alongside the CFA franc, the country’s other currency. The second country in the world after El Salvador to take such a measure, the Central African Republic has however been criticized for this decision, considered very geopolitical.
The country is unprepared for the massive use of bitcoin by its inhabitants. Few have access to a smartphone, essential for cryptocurrency payments, and no education work has been undertaken. Many observers see it as a way of currying favor with Moscow — allowing current leaders to stay in place through paramilitary groups.
