After an impressive bull run the previous year, 2022 saw total crypto market cap drop by 63% thanks to contagion.
2021 was one for the books in the crypto industry. It was an incredibly bullish year, and we saw the entire crypto market cap quadruple to hit an ATH of $3 trillion on 8th November 2021.
Unsurprisingly, we all got into 2021 extremely hopeful about the industry. But, against every enthusiast’s hopes, 2022 was a dismal year for the crypto industry and goes down as the worst yet.
The value of the crypto markets dropped by a whopping 63% from January’s $2.3T to $843 million on 30th December. The severe market downturn resulted from several events over the year, with some still causing ripples today.
The crypto contagion is to blame
A research report by Ark Invest indicates the year was marred with more events that caused a downward movement in the markets.
2022 kicked off on a high, with several crypto companies, including FTX.com and Crypto.com making their debut on Super Bowl ads. The move came at a critical time when major coins had stopped rallying, although the market was still hyped. The move caused a slight upward trend before the markets kept on with their way to the bottom.
Interestingly, FTX would later cause one of the year’s biggest headlines by declaring bankruptcy just nine months later before an eventual collapse.
Also related: SBF Hints at Repaying FTX Investors via New Company
On 16th March, the Federal Reserve announced a 0.25% rate hike for the first time in two years. Federal funds rate had remained at zero since 2018, when the central bank slashed rates to cover the blow from the recession caused by the pandemic. As expected, the markets rallied for a while as most people turned to crypto to hedge against inflation. Still, the move was short-lived.
It’s been all downhill since April 2022. The most significant catalyst was the collapse of the Terra Network in May which had a domino effect on the industry. Within a few days, the stablecoin UST had lost its peg and sister token LUNA fell from $80 to a few cents, causing a significant blow to the industry.
A series of big players in the market declared bankruptcy, causing even further damage. First came the announcement from Three Arrows Capital in late June. The Singaporean-based crypto hedge fund had to liquidate following orders from the British Virgin Islands.
Following this, other institutions that fell to their knees include the Celcius Network, FTX, and BlockFi. Genesis also had to halt its withdrawals sometime in November amid all the collapses, causing further downward spirals.
Also read: BlockFi files for bankruptcy as it plans on platform restructuring
Crypto market still bullish for the long term
Despite the drastic reversal of moves in 2022, the report also indicates crypto users remain bullish on the markets.
According to the research, blockchain technology remains a significant driving factor for financial, monetary, and internet revolutions. As things are only getting started in Web 3, many remain confident that the long-term opportunity for the technology and its applications can only strengthen. Predictions indicate the crypto market could hit $20 trillion within the next decade.
At the time of writing, the markets are chasing a short rally, with the current value capped at $1.6 trillion. However, we’re still deep in the middle of crypto winter, and most coins are trading well below their ATHs. As usual, we play the ‘wait and see’ game to see how the markets play out.
