From purge to fusion

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2022 has been a year of both challenges and opportunities for the crypto industry, with several important developments worth revisiting and considering as we approach 2023.

From the explosive growth of the metaverse and web3 to the continued evolution of decentralized finance and non-fungible tokens, 2022 has been a year of major milestones and breakthroughs in the crypto world.

The world has also seen the global crypto community align in support of Ukraine amid its tensions with Russia. Thousands of people and big brands have teamed up to donate crypto funds to Ukraine, which will go down in history as one of the most significant mass-market uses of blockchain technology to date.

2022 will also be remembered for the launch of the first-ever Ukrainian NFT War Memories museum, built to preserve culture and history using blockchain technology and non-fungible tokens, and for the launch of the NFT collection the most bizarre of all time – the Trump collection.

The essential purging

Beyond the global economic headwinds, the crypto ecosystem found itself floundering over the year amid several unprecedented events, including but not limited to hacks, as well as the downward spiral and the collapse of some of the biggest names in the crypto space.

Promising projects like Terra (LUNA) collapsed as many investors continued to exit the market. Algorithmic stablecoin Terras UST lost its peg to the dollar, causing investors to lose billions in the explosion. Terras native token LUNA lost all of its value, further adding to the downward pressure.

Overall, the Terra disaster wiped billions from the crypto ecosystem in a matter of weeks in May. Several centralized finance lending institutions (CeFi) like Voyager Digital and Celsius, and hedge funds like Three Arrows Capital (3AC), lost huge amounts of money because they had leveraged positions or had lent significant funds to Terra.

The market began to show early signs of recovery at the end of the summer. Both retail and institutional investors have started returning to the land of crypto. However, this renewed investor interest, right after the Terra debacle, was short-lived. As the market struggled with an extended crypto winter, shocking revelations about FTX – one of the biggest crypto exchanges – emerged in November.

Binance CEO Changpeng Zhao (CZ) added fuel to the fire by exposing concerns over the solvency of FTX and the value of the FTT token issued by the platform. Shortly after, Binance emptied all of its FTT tokens, causing panic. Investors, most of whom were still suffering from the losses of the Mays Terra implosion, rushed to withdraw their assets from FTX.

This led to a massive liquidity crisis at FTX, following which the platform filed for bankruptcy. In addition to this, several new concerns emerged, particularly that FTX was mixing deposits and client funds. Much like the Terra implosion, the fall of FTX wiped billions from the ecosystem and destroyed several other projects, hedge funds and credit institutions along with it.

Essentially, two of the biggest crashes in crypto history happened this year. The chain of events effectively cleaned up the fledgling ecosystem, allowing the community to build on mistakes and experiences, rooting out bad apples from the ecosystem while allowing other projects to reach new heights. . For example, the fall of FTX and Sam Bankman-Fried has allowed Binance to position itself at the center of the crypto ecosystem.

The Historic Ethereum Merger

The Ethereum (ETH-USD) merger on September 15 has emerged as one of the most important events of 2022. The largest smart contract blockchain has successfully completed the merger, officially moving from the proof-of- power-intensive work (PoW) to the environmentally friendly Proof-of-Stake (PoS) consensus mechanism.

One of the positive effects resulting from the merger is that the overall energy consumption of Ethereum networks has dropped by 99.95%. To put this figure into perspective, the power consumption of the new Ethereum PoS blockchain is roughly equivalent to 1% of what PayPal (NASDAQ:PYPL) consumes.

With the merger, the Ethereum team has phased out other planned upgrades and updates throughout 2023. These rounds of updates will overcome scalability issues that cloud the Ethereum network.

Sponsorships and partnerships

Crypto.com paved the way for other brands in 2022, venturing out of the crypto bubble and connecting with users by leveraging partnerships with mainstream brands, celebrities and sports personalities, to name a few. name a few.

In terms of raising awareness and encouraging more people to enter the world of cryptocurrencies, Crypto.com has left no stone unturned. The platform has released several advertisements with high profile personalities like Matt Daemon and LeBron James. The platform has also signed several partnership agreements with the UFC, NBA, Formula 1 and dozens of others.

Other blockchain ecosystems like Tezos (XTZ), Polygon (MATIC) and several others have also entered into strategic partnerships with consumer brands and events. Tezos’ thriving list of brand integrations includes names like Manchester United (NYSE:MANU), McLaren Racing, Papa John’s, Evian Water, Gap (NYSE:GPS), Ubisoft and many more. Tezos was also the main partner for this year’s Art Basel in Miami Beach, helping users discover crypto art and generate their own NFTs.

Meanwhile, the Polygon layer 2 blockchain has continued to contribute to the overall growth of the crypto ecosystem. Polygon has integrated several major brands throughout 2022, including but not limited to Reddit, Adidas (OTC:ADDYY), the NFL, Starbucks, Adobe (NASDAQ:ADBE) and even Meta (NASDAQ:META) .

Polygon has also expanded its presence in the traditional financial sector and in the technology sector. Trading platform Robinhood (NASDAQ:HOOD) has partnered with Polygon to launch its Web3 wallet. Similarly, payment provider Stripe uses Polygon to facilitate Web3 payment transactions, and smartphone brand Nothing uses Polygons framework for Web3 application development.

Above all, crypto was on display during the FIFA World Cup, positioning cryptocurrency projects and leaders to bring Web3, Metaverse, and other emerging technologies in front of billions. Major crypto platforms like Binance and Crypto.com, as well as metaverse ecosystems like Upland, have announced multi-year deals and launched several events for users to learn about the technology.

NFT – Monkeys were bored

While NFTs have been around for over five years, the non-fungible boom happened in 2021. The trend continued until the Terra disaster rocked the crypto ecosystem. During this period, we have witnessed the birth of BAYC NFTs.

Bored Ape Yacht Club (BAYC) NFTs gained immense popularity in 2022. Everyone was flaunting their Ape avatars, leading to these NFTs changing hands for millions of dollars. Celebrities and prominent figures have jumped on the hype bandwagon, further increasing the demand and value of NFTs.

Yuga Labs, the team behind BAYC NFTs, continued to grow throughout 2022, acquiring top platforms like CryptoPunks, Meebits, and WENEW Labs. Thanks to the popularity of Apes, Yuga Labs’ NFT collections dominated the overall NFT capitalization during the fourth quarter despite the prevailing bearish conditions.

Promising growth, capital inflows, hacks, etc.

Aside from the plummeting valuation backdrop, another segment that has outperformed falling prices over the past year is the decentralized application (dApp) universe, which has seen a roughly 50% increase in the number unique active portfolios (UAW) compared to 2021.

At the same time, the decentralized finance (DeFi) industry has found itself tangled in a mess – first due to the implosion of Terra, then due to the collapse of FTX-Alameda. Currently, the total value locked (TVL) in DeFi protocols has fallen significantly, recently hitting lows below $40 billion (nearly 80% below the all-time high of 2021).

On-chain analysis for the NFT market remained positive, but not by much. The average increase in NFT transaction volume in 2022 is only 0.41% higher than the volume in 2021. Meanwhile, blockchain games accounted for around 49% of total on-chain activity in 2022, with Splinterlands holding still the crown as the most popular play-to-win (P2E) game.

Despite the ups and downs, venture capital inflows into the blockchain ecosystem remained steady throughout the year. Capital investments and project incubation peaked in the first half of 2022, with Web3 infrastructure and startups taking the lion’s share of the funding pool. Venture capitalists and angel investors had already invested more than $30 billion in blockchain technology by the end of June 2022, exceeding total funding for all of 2021. Yet, due to the prolonged bear market, Capital inflows slowed considerably during the second half. of 2022.

On the other hand, 2022 was a year of record breaking hacks. Throughout the year, there were a total of 312 hacks, resulting in losses of almost $50 billion – the highest in cryptocurrency history. Simultaneously, these incidents have prompted regulators and governments to accelerate developments across a broader spectrum. Between the European Union’s MiCA regulations and the first White House bill for digital asset regulation, serious progress has been made towards establishing a comprehensive investor protection framework.

Takeaway meals

As the year draws to a close, it is clear that 2022 has been a pivotal year for the industry and there was no shortage of exciting developments to follow. Although the future of crypto is still uncertain, it is clear that the industry continues to grow and evolve at a rapid pace. Looking ahead to 2023, it will be interesting to see what new innovations and breakthroughs the crypto universe holds.

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