Crypto in 2022: Invasion of Russia, ETH Merger, Collapse of Terra and FTX, Consequences

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The Kaiko Research team focused on the ten defining events of the crypto market in 2022, which include new crypto activity amid the Russian invasion of Ukraine, the collapse of Terra, the crisis of the crypto credit, the dominance of Binance, the evolution of Uniswap, the Ethereum merger, the collapse of FTX and its aftermath, and macro.

Kaiko, the provider of real-time and historical aggregated trading data, order books and prices on cryptocurrencies, has released a special year-end edition of its data debrief.

In it, the Kaiko Research team focused on the ten defining crypto market events of 2022, which include new crypto activity amid the Russian invasion of Ukraine, the collapse of Terra , the crypto credit crunch, Binance dominance, the evolution of Uniswap, the Ethereum merger, the FTX collapse and its aftermath, and macro.

The report analyzed each definition of each event and added comments/predictions for them. We quote the latter below:

1. Russian Invasion Causes Increased Crypto Activity: “Crypto has proven it can be mined in times of extreme uncertainty, especially stablecoins, allowing citizens to escape volatile currencies . This dispute has also demonstrated how quickly sanctions and restrictions applied by global payment networks can curb unwanted use of crypto. Terra Collapse Destroys Billions of Value: “It now goes without saying that if the returns seem too good to be true, they probably are. The Terra collapse was also a great example of the importance of on-chain data when investigating the warning signs of a token or the health of projects. In 2023, pay attention to what is happening on the DeFi protocols!3. Crypto credit crisis knocks down illiquid lenders: “stETH is a relatively small crypto token, but played an outsized role in the collapse of Celsius and the broader crypto credit crisis. This scenario demonstrates the risks involved when centralized platforms invest client funds in high-risk DeFi protocols. Again, if the returns seem too good to be true (in this context, on centralized platforms), they probably are. More broadly, the crypto credit crunch continues to play out today and could have a bearish impact on markets if bankrupt lenders are forced to liquidate their crypto holdings in the new year. »4. Binance Becomes Even More Dominant: “Despite a record $6 billion outflow following fears over its reserve strength in December, Binance continues to dominate spot trading. However, as the largest exchange in the world, it is under intense scrutiny from regulators and customers alike, which could reach a boiling point in 2023. Merchants increasingly value transparency, and there could very well be a move towards more regulated centralized platforms Uniswap is evolving into a formidable CEX competitor: “Uniswap’s volume has been impressive throughout this bear market. Will governance activate the long-awaited fee change to divert some revenue to Token holders?How will DEXs be affected by regulation?And can any DEX make a dent in the dominance of Uniswap V3?Overall, the structure of the cryptocurrency market continues to be dominated by centralized exchanges with Ethereum-based DEX volumes still lower than their centralized counterparts. However, DEXs have shown remarkable resilience in the current market turmoil and innovations continue to make them more competitive against CEXs, especially after the collapse of FTX. »6. Ethereum Merged and Nothing Bad Happened: “While the price of ETH fell post-merger, in the long term, the upgrade bodes well for the future of the network as it paves the way for future scalability improvements.However, this has also been controversial as nearly 70% of blocks are OFAC compliant, heightening concerns about censorship continuing into 2023. Although there is a growing anticipation (and some concern) around a deadline for ETH staking withdrawals and network scaling roadmap, layer 2 scaling solutions built on top of Ethereum have grown in popularity and will likely continue to do so in the new year (we’ll discuss more about L2s here).”7 The collapse of FTX exposed a scam of epic proportions: “In hindsight , it seems obvious that FTT was a massive vulnerability, as a token with almost no utility, liquidity or demand. To avoid the next FTX meltdown, the industry must question all business models and balance sheets and demand transparency from the centralized sites they use. »8. Liquidity is drying up in a post-Alameda world: “Hopefully the drop in liquidity is temporary, and there are already signs that market makers are re-entering markets and regaining confidence. However, it is likely that market makers will be more careful about which exchanges they hold funds on, perhaps increasing the market share of more regulated exchanges. »9. Asset valuations questioned after FTX: “The industry needs to start recognizing that market capitalization and fully diluted valuation are theoretical numbers that do not accurately reflect the value of a token, particularly if a big holder is looking to cash in. A return of altcoin liquidity would benefit the market, as well as DeFi protocols that rely on price oracles for less liquid tokens.”10 The Year of the Macro: “The Concerns over the global recession and tightening liquidity will continue to weigh on risk assets, especially as quantitative tightening gathers pace.However, the US Fed and other central banks are expected to slow the pace of rate hikes next year, perhaps providing some respite for risky assets.

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