Why This Might Be Crypto’s Worst Year Yet
- Six months into 2022 and the crypto industry has been hit by several blows.
- NFTs and crypto projects were victims of a catastrophic exploit that is reminiscent of the dark days of 2017.
- Optimists are hopeful for better days in the second half of the year.
2022 began with a lot of promise for investors in the crypto space but six months down the line, the fairy tale is turning into a grim nightmare.
The good, bad and ugly
By the end of 2021, crypto prices were surfing at all-time highs with the global market capitalization within arm’s reach of $3 trillion. Bitcoin had touched $68,000 and enthusiasts made valiant predictions that the asset would breach the $100,000 mark within the first two quarters of 2022.
2022 rolled by but the predictions did not come through. Instead, the industry was rocked by one scandal after another that shaved off a chunk of value from the cryptocurrencies. Non-fungible tokens (NFTs) were the first to fall victim after OpenSea, the largest NFT marketplace, suffered a bug exploit leading to the loss of several pieces.
Since then, transaction volumes for NFTs have fallen by over 50% from the highs of 2021, leading pundits to wonder if the bubble had burst. A recent survey by DEXterlabs revealed that over half of NFT investors were yet to make a profit from their investments.
Things went from bad to worse when TerraUSD (UST), the third-largest stablecoin, de-pegged from the dollar. The aftermath was chaotic as investors lost billions of dollars and the entire Terra ecosystem imploded under the weight of the tragedy. Investigations by regulatory agencies were carried out exposing a can of worms of negligence that threatened to put the entire industry at loggerheads with regulators.
Terra’s tragedy pushed prices even further but just as investors thought that the crypto winter was nearly over, Celsius broke the camel’s back by announcing that it was pausing all withdrawals due to “extreme market conditions.” After the announcement, Bitcoin fell to an 18-month low of $22,000 and the cryptocurrency market cap plunged below $1 trillion.
Hackers also ran riots in the first half of the year with a keen focus on decentralized finance (DeFi). In the first quarter alone, hackers lost over $1.22 billion which is eight times what they lost in the same period. Mitchell Amador, CEO of Immunefi warned that the industry should brace for more sophisticated attacks in the coming months.
“As DeFi gets bigger and bigger, these kinds of attacks become more and more lucrative,” said Amador.
Can 2022 turn things around?
The opinion is split at the moment on whether things could turn around for the ecosystem. For the pessimists, there is little indication that things could turn around for crypto with Ethereum’s delay of the “difficulty bomb” for the merge casting doubt over the industry.
Delta’s Kavita Gupta claims that she “strongly believes that we’ve not seen the bottom yet” as she thinks that $14K to $16K might be the ideal bottom. Others like Guggenheim’s Scott Minerd have predicted an $8,000 bottom for the asset while Peter Schiff warns investors not to buy the dip.
Although things might look bleak for the entire industry at the moment, optimists are banking on regulations to offer a clearer framework for the industry. A recent bill by Cynthia Lummis and Kirsten Gillibrand has been hailed by players while the SEC’s approval of a spot Bitcoin ETF might be the catalyst for a reversal of trends.
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