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2022 has been a year of major milestones and innovations in the cryptocurrency industry, including the meteoric rise of Web3 and the Metaverse, the continued development of decentralized finance, and the introduction of non-fungible tokens. The upward trend appeared to continue, with the global crypto community aligning in support of Ukraine amid its tensions and ultimate conflict 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. But this social unity has not helped to mask the dramatic decline that many coins and crypto exchanges are currently taking.

The market itself faces many natural difficulties. The crypto ecosystem found itself in a state of flux throughout the year following several unprecedented events, including but not limited to hacks and the decline and eventual demise from some of the most prominent crypto companies. In addition to the challenges posed by the state, the global economic downturn the world is experiencing is taking its toll. There is also the fear of what happened with FTX. FTX was one of the top cryptocurrencies in 2021, but recently filed for bankruptcy. FTX’s fall affected South Korea, Singapore and Japan, with a combined traffic share of 15.7% to FTX.com. These countries are now looking for other cryptocurrencies to invest their money in (if you want to know more about the collapse of FTX, read our globalEDGE blog about it here). As many investors continued to exit the market, promising projects like Terra (LUNA) appeared to bring hope, but they continually failed. Investors suffered massive losses due to the collapse – for example, Terra’s algorithmic stablecoin UST lost its peg to the dollar. Terra’s native token, LUNA, has lost all of its value, adding to the downward pressure. Because of this, Luna wasn’t the only company to lose profits.

Several centralized lending financial institutions like Voyager Digital and Celsius and hedge funds like Three Arrows Capital lost a lot of money because they had leveraged positions or lent large funds to Terra. In total, the Terra disaster wiped out billions of dollars from the crypto ecosystem in a matter of weeks in May. This is a repeating pattern.

So what’s going on with the major market players amidst these swings? One of the major cryptocurrencies, Bitcoin, topped $21,000 twice in a row, extending one of the most unlikely bull rallies of the year. This indicates that the digital currency has now recouped all of its losses since FTX’s dramatic fall in November. However, crypto analysts disagree on whether the rally will continue as Bitcoin does not consistently break above $21,000. Skeptics argue that there are no fundamentals for a long-term upside, so investors should avoid betting on the recent rise. The law firm advising FTX in its multi-billion dollar bankruptcy, Sullivan & Cromwell, said the company’s assets were worth approximately $5.5 billion. These assets included crypto assets worth $3.5 billion and cash worth $1.7 billion. The crypto rally coincides with this announcement. For FTX creditors, this will be important if the rally continues.

Now investors are betting that the Federal Reserve will slow its interest rate hikes, which will lead to a broad rally in risky assets, which has led to the rebound even of some beat tokens, such as FTT, the exchange’s internal token in FTX bankruptcy. The publicly listed cryptocurrency exchange cut costs and laid off employees. It increased by more than 30% last week.

People wonder if Coinbase, the most popular and perhaps the most reputable US crypto exchange, will fall next. There are several reasons why this is highly unlikely. It is a public company listed on the American stock exchange, it is subject to strict regulations and has properly audited financial statements. Also, the price has recently unexpectedly increased in the New York market. This means that the coin is not likely to fail any time soon.

The cryptocurrency market is always fluctuating and things are changing every day. Throughout 2023, we will need to continue to monitor this popular market, and globalEDGE blogs will continue to update our readers.

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