Safe to say, 2022 was definitely not the year for crypto. A stark contrast to the period between 2017 to 2021, where we saw crypto become more mainstream and the markets were super bullish.
To give a sense of the market, back in November 2021, Bitcoin hit north of US$68,000 – the highest value of any cryptocurrency yet and the future looked brighter than ever.
Fast forward to 2022 and the crypto winter hit hard. From there, it’s been all bears since. As of the time of this writing, 1 BTC = US$18,841.
So, what happened?
Particular events in 2022 were major triggers for the crypto winter and continued to tilt the odds in favour of the bear. Here are some of the more notable ones that sent shockwaves through the crypto industry:
Russia’s invasion of Ukraine
On 24 February 2022, Russia invaded Ukraine in a major escalation of the Russo-Ukrainian War. Since then, cryptocurrencies have experienced increased volatility amidst economic uncertainty and rising inflation across the world. In fact, major cryptocurrencies like Bitcoin and Ethereum are seemingly aligned with the trajectory of the stock market.
The Terra LUNA crash
Around May 2022, the algorithmic stablecoin TerraUSD and its sister coin Terra (LUNA) crashed, causing over an estimated US$60 billion wipeout in the digital currency space. The after effects of the crash caused a general bearish sentiment that the market was still trying to recover from and then came…
The fall of FTX
The last major crisis happened in November 2022, where FTX, along with its sister company Alameda Research, filed for bankruptcy. On November 11, the former FTX CEO and founder Sam Bankman-Fried officially resigned and left his company in uncertain territory. In a span of a couple of days, things began to unravel quickly and spiralled into a spectacular collapse of one of the largest crypto exchanges in the world.
Looking at the road ahead
With so much uncertainty surrounding cryptocurrency, will we see a resurgence of the industry and how will it move forward?
Here are 5 things to look out for in the cryptocurrency space in 2023:
- Continued widespread adoption and integration of cryptocurrencies into mainstream payment systems and financial infrastructure. With the potential for more partnerships and collaborations between traditional financial institutions and cryptocurrency companies.
- The development and implementation of more advanced, secure and decentralized blockchain technologies, such as proof-of-stake protocols and zero-knowledge proofs.
- Increased regulatory clarity and government involvement in the cryptocurrency space, including the possibility of more countries introducing and enforcing cryptocurrency-specific legislation.
- The emergence of new use cases for more decentralized applications, platforms and blockchain technology, such as in the areas of supply chain management and Internet of Things (IoT) networks.
- An increased competition among cryptocurrency exchanges could potentially lead to improvements in security and user experience, which will distinguish the top-tier exchanges from those that are unable to pivot quickly enough.
Looking away from the big picture, here’s what you can do to ensure that your crypto trading journey is smooth sailing:
Whether it’s a cryptocurrency exchange or a project, always ensure there is transparency, especially at their backends. Oftentimes, many of these fail because of mismanaged finances or inappropriate schemes that go on until it comes tumbling down. With transparency, you can see what’s going on and any red flags can be spotted early.
In the wake of the FTX collapse, many crypto exchanges have begun publishing their ‘Proof of Reserves’, to show that they have liquidity on hand to support customer withdrawals should the need arise. This way, anyone can verify the authenticity and reliability of the data presented without any doubts.
An extension of ‘Proof of Reserves’, most crypto exchanges and projects that are strongly tied to assets such as stablecoins should have frequent scheduled audits to prove that there is no misappropriation of funds or assets. This has been a long-standing debate, with some exchanges refusing to do audits to prove that they have sufficient assets to back their tokens in circulation.
More Crypto Education
Another method to protect yourself in this highly volatile industry is by way of education. More people need to know the basics and what to look out for in crypto projects so they can choose the right assets to invest in and can do so with proper risk management.
Presently, many are just experiencing FOMO and are willing to follow the hype without really knowing much or anything about the tokens they’re investing in. By having awareness and equipping yourself with the relevant knowledge will force more high-quality innovations in the cryptosphere and only the hype will go to the best projects that deserve them.
A new year, a new beginning
It is difficult to predict with certainty what the trends in the cryptocurrency space will be in 2023, as the market is constantly evolving and subject to various factors. The many twists and turns will unfold in the months to come so buckle up, it’s going to be another ride.