2022 was a tough year for investors, businesses, and consumers whose wallets were squeezed by the higher inflation. Although many assets have had a bad performance during the year, cryptocurrencies were among the assets that suffered the most, not just in terms of market valuation, but also in terms of reputation. The collapse of FTX has undoubtedly had a big impact but it was not the only concern. Bitcoin lost more than 60% of its value in 2022 alone. Other cryptocurrencies suffered from a similar fate.
Free fall and loss of billions of dollars in value
Dogecoin, Terra, Ether, and others have all lost a lot of value during 2022 – and this affected institutional funds and individual investors who held or still hold a stake in those digital tokens. Indeed, it has been probably the most challenging year for those assets in absolute terms. Bitcoin, for example, plunged under 20,000 per unit for the first time since 2020. Despite those moves, you can still take advantage of opportunities in the market with a broker that enables you to buy and sell cryptocurrency CFDs like easymarkets.com, so that it does not matter what market conditions there are, and you can find possibilities at any time (in rises or falls).
A change in attitude
The plunge in valuations of crypto were all happening while there was a shift in opinion and attitude towards those tokens, which can be most seen on social media sites like Twitter and LinkedIn. People have become more critical of digital tokens and are more frequently writing about how crypto has no intrinsic value and that those are not real assets. Adding insult to injury was the fact that cryptocurrencies consume a lot of energy to be mined, at a time when the world is meeting with skyrocketing energy prices and fighting climate change.
Other factors are involved in the decline
The shift in attitude did not come from nowhere. Multiple factors can be held responsible for the increased awareness of crypto’s issues. The fall of FTX was just the tip of the iceberg. It was preceded by the collapse in Terra, and the many incidents of hacking and money laundering, taunting the reparation of crypto even further.
Moreover, 2022 has been a year of inflation and general market decline across different asset classes, so investors were running away from risky assets (cryptocurrencies are volatile which means they can bring opportunities and risks as they move). This general decline was because of the impact of tighter monetary policy from central banks around the world. Interest rates have been rising and so this meant different assets experienced a change in their valuation.
Moreover, the US Dollar, in which most cryptocurrencies are denominated, has strengthened significantly during 2022, although it pulled back recently. This meant that prices of digital tokens moved in the opposite direction, causing the decline.
Conclusion
2022 has been a wild ride in the markets, and especially so for crypto traders and investors. Its reputation has also suffered dramatically. This, however, does not necessarily mean that its price will go to zero. If the general mood in the market improves in 2023, and investors seek more risk, then this year might be a year of recovery.
