2022 may not have been a good year for stocks, but it was a terrible year for cryptocurrencies. The S&P 500 is expected to end the year with a 17% loss, continuing this year's long losing run for stocks. The situation for Bitcoin and other popular cryptocurrencies is significantly worse.
BTC is currently down 64% on the year, while ETH is down 66%. The majority of other significant altcoins have fallen more than 90% as the risk curve is extended.
Do you remember when the Federal Reserve held interest rates at zero and inflation was only temporary? How much a year can change. Bitcoin (BTC) was approximately $48,000 and Ethereum (ETH) was worth over $3,800 in January 2022; the Fed's fight against inflation is mostly to blame for the dramatic decline in both of these top coins. The Terra Luna crash and the FTX fiasco have really put some serious questions in the minds of naysayers.
"2022 has witnessed several black swan events including Terra Luna, Celsius, Three Arrows, and FTX. All of which have damaged crypto's reputation, lending credence to detractors cheering the downfall of the asset class that they refer to in terms of a bubble, scam and gamble," Toby Gilbert, CEO and Co-Founder, Coinweb said.
Losses shouldn't come as a surprise to anyone because the past year has been littered with crypto meltdowns, bankruptcies, and upheaval. The current debate is on whether the current state of the market will remain chaotic in 2023 and how long the crypto winter may last.
What to Expect in 2023
The situation for other speculative altcoins has been substantially worse in 2022 than it has been for Bitcoin and Ethereum. Altcoins are not where investors probably want to be while the bear market is raging, and that situation won't improve anytime soon.
The effort of establishing credibility for many altcoins during the bull market has proven more difficult now that there is less market liquidity. Altcoins will keep declining as long as Bitcoin and Ethereum don't rebound. And many will completely vanish, much like bear cycles in earlier times.
Moreover, the market is expected to settle down with not-so-good projects giving way to stable projects. As Toby Gilber further adds, "What needs to happen now and is in the process of happening, is bad actors and weak projects being washed out, allowing the space to mature and deliver on its promise of being a game-changing technology in 2023."
Another thing which is expected in the year 2023 is the regulations. Amidst crises like Terra Luna, Celsius and off lately FTX, the ecosystem is likely to witness regulations from the sovereign government. "I think the crypto industry is going to continue to go through an increasingly massive regulation process. Exchanges have been the first step by regulators, the next step will be a very aggressive banning plan on the use of decentralised cryptocurrencies. Our authorities want to leave the field clear to start forcing us exclusively CBDCs." said Mani Thawani, CEO and Chairman, Mundo Crypto.
Arul Prakash, CEO and Founder, Buk Technology an NFT-based hotel inventory distribution infrastructure and a secondary marketplace which recently raised 100k in investments from Polygon Studios said, "Leaving aside the noise in the crypto space with malicious actors continuing to exploit hacks and regulatory whitespaces, the web3 space has evolved a lot in 2022 with newer use cases of NFTs emerging and major moves in privacy-related areas using ZK technology, thought Metaverse's promise of 2022 is still unfulfilled."
Regarding what to expect in the next year he adds, "2023 will see further use cases of tokenization in the real world emerge, with early adopters in institutions and enterprises willing to experiment. Metaverse dream still seems far until interoperability standards are defined and established. Regulation would have tried to play catch up with the emerging space, but would not be successful due to the fast-changing nature of the technology and its use cases, which even Developers are not able to keep track of."