The Year in a Nutshell: Crypto Winter

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(noun) a period of low or falling cryptocurrency prices, alternating with bull markets

The crypto world calls it winter. Others might call it a meltdown. Whatever your preference, 2022 has been the year of the crypto disaster. More than $2 billion in notional value has faded as the total market capitalization of crypto tokens has fallen 70% from its peak in November 2021. The timing of the downturn points to what many see as its cause: the Reserve federal.

It took about six months from the time Fed Chairman Jay Powell raised interest rates, halting the flow of cheap money that had buoyed the global economy and fueled speculation in the Covid era, for crypto to reach a full-fledged crisis. In May, the crash in the price of bitcoin and other currencies had pushed crypto business models to breaking point and exposed fraud and mismanagement.

The first major crack appeared when stablecoin terra and the related luna token crashed almost overnight in what has been called the biggest wealth destruction in this time frame in…crypto history. This record was soon to be tested. Hedge fund Three Arrows, lenders Celsius, Voyager Digital and BlockFi, and the most explosive Sam Bankman-Frieds FTX empire have all filed for bankruptcy.

But for crypto believers, these events are part of a natural cycle of renewal. Bull markets attract gamblers and scammers. Crypto winters are thinning the herd. Veteran cryptonauts will regale you with stories of how they thrived during the first crypto boom of 2017 and weathered the cold spell that lasted until the thaw of 2020. In the cult of crypto, the profits from the next boom are sown during the fallow period.

But to critics, this year’s crash and the billions in losses for ordinary investors have laid bare the flaws of the anarchic, self-sustaining cryptosphere. The question is whether some semblance of a cryptos vision for decentralized finance will survive the changing seasons.

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