Recap of 2022 in Web3: markets, major events, and lessons learned.
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One Click Crypto
December 29, 2022
Some describe 2022 as the worst year in crypto’s history, but it is just another piece from the cyclical pattern that shapes this revolutionary technology. The 2022 crypto winter is comparable to the 2014/2015 decline but is still far from 2018/2019 and 2019/2020 market bottoms.
In 2022 cryptocurrencies faced many obstacles, ranging from global macro events to black swans, such as the Terra ecosystem collapse and the bankruptcy of the FTX exchange.
However, the industry remained resilient and continued to progress. There are more Web3 trends to look forward to in the coming year than ever.
9 Hidden Web3 Trends To Watch In 2023
… that are gaining momentum.
This article is divided into two parts. In the first section, we will analyze the macro state of the market, and then we will examine each quarter individually in greater depth.
The Macro State Of Crypto In 2022
Global Market Cap
At the beginning of the year, the cryptocurrency market had already lost -29.99% from its peak in November 2021. During the dire economic conditions, the global market cap stayed within the $1.57T — $2.26T range until April, when the collapse of the Terra(LUNA) ecosystem shook the whole industry, erasing -61.53% ($1.31T) from the market in 80 days.
After the Terra Domino Effect had nearly lost all its momentum and the industry was in a “rebuilding” mode with market prices consolidating, we were hit with another black swan event — the FTX exchange collapsed.
The global cryptocurrency market went down by -$1.47T in 2022 in total.
Crypto Market Cycles: Why The 2022 Bear Market Was Inevitable
The average length of a crypto market cycle is four years. The industry is still new, with the first decentralized currency, Bitcoin, created in 2009, meaning that cycle lengths will likely change over time.
What we can learn from previous market cycles is that crypto always grew sustainably after each bear period. One event that played a critical role in the last bull markets was the halving of BTC — 456 days before which the market bottomed, followed by a steady increase and an upward explosion after the halving was complete.
The next halving date will happen between February 2024 and June 2024, and some experts predict that the market will begin recovering as early as next year. Still, the increased correlation between crypto and traditional markets has been evident in recent months, and a global recession can be an obstacle (or a catalyst?) in 2023.
In conclusion, periods of massive drawdowns are expected in the current market cycle dynamic of crypto, making the 2022 crypto winter unavoidable. On the bright side, historical patterns indicate a bullish period starting within 6–18 months.
The Big Picture Remains
Holders With At Least 1 BTC Reached 1 Million While the market lost trillions of dollars, Bitcoin maxis took the opportunity to “stack some sats,” increasing the number of BTC holders with at least 1 whole bitcoin to nearly 1 million.
Long-term holders kept accumulating A more important metric is the total supply held by long-term holders in Bitcoin. Currently, it is at an all-time high, showing a solid increase in value investing during the 2022 crypto winter.
That is important because asset managers (ex. BlackRock — $10T+ AUM) and whole governments are pivoting their way into crypto. Keeping the market decentralized in the hands of everyday people is vital.
The community did well here in 2022.
2022 Crypto Recap by Quarters
After covering the big picture, it is time to break down 2022 into quarters to understand better the series of events that got the market where it is today. For each quarter, we will include the most valuable lessons learned.
At the beginning of 2022, the crypto market was already in decline, with NFTs being one of the few exceptions of good-performing assets.
ATH For The NFT Market (January) NFTs reached a peak trading volume of $17B in January, driven by OpenSea’s astronomical value and Bored Ape Yacht Club.
Russian-Ukrainian War Escalates (February) In February, the Russian-Ukrainian war reignited, impacting the world’s economy. Cryptocurrency showed one of its key utilities to the fullest — neutrality. Bitcoin was used both for donations to Ukraine and Russia to avoid sanctions.
President Biden Signs Long-Awaited Crypto Executive Order (March) In March, President Joe Biden issued an executive order on the government’s control of cryptocurrencies, urging the Federal Reserve to investigate whether it might create its digital currency.
Even at its peak, the cryptocurrency market accounts for 3.12% of the global GDP, making it only a tiny portion of the global economy. While by nature, crypto can be self-sustainable due to its decentralized technology, at the current stage, the industry is still vulnerable to macroeconomic conditions.
NFTs proved that separate parts of Web3 can operate as independent markets as they should in a decentralized world. Still, it was short-lived as the NFT market tumbled over 95% after its peak in January.
Both external and internal events can impact crypto, making the DeFi market an excellent “punching bag” when things go wrong. That is precisely what happened between April and June of 2022.
The Collapse of Terra LUNA (April — May) The collapse of LUNA and its stablecoin TerraUSD(UST) precipitated a $40B market crisis. A domino effect started that caused the downfall of Three Arrows Capital (crypto hedge fund) and its creditors, including Voyager and BlockFi. The total value locked in DeFi dropped by 50%+.
The FED Started Quantitative Tightening (June) The US Federal Reserve’s policy of money printing, also known as “quantitative easing,” played a significant role in driving the previous global bull market. However, after the FED had printed $16.38T+, they decided to reverse this policy through a “quantitative tightening,” which involves raising interest rates significantly to reduce the money supply in circulation. The world went into a full bear market mode.
A lesson that should have been learned from the collapse of previous algorithmic stablecoins, such as Iron — the stablecoin of Titan in 2021, is that this technology is inherently fragile and unreliable. These uncollateralized digital assets, which attempt to peg the price of a reference asset through financial engineering, algorithms, and market incentives, are unstable and constantly vulnerable to losses.
As the crypto market was recovering from its setbacks and governments were increasing regulation in the space, significant players took the opportunity to enter the market. Coincidentally or not, one of the initially accused causes of the Terra collapse — BlackRock*, announced their plans to release products that give investors crypto exposure finally.
*BlackRock immediately denied any associations with collapse of LUNA/UST
EU Steps to Regulate Digital Assets (July) In late June/early July, European lawmakers agreed on regulating cryptocurrencies, known as Markets in Crypto-Assets (MiCA). This was the European Union’s first attempt to create a comprehensive regulatory framework for digital assets in the region.
Blackrock Partnered With Coinbase (August) BlackRock, the world’s largest asset management, partnered with cryptocurrency exchange Coinbase in August, a move that would benefit both Wall Street and the cryptocurrency industry.
The Ethereum Merge (September) One of crypto’s most anticipated events was the transition of the Ethereum blockchain network from Proof-of-Work (PoW) to Proof-of-Stake (PoS). On Sep 15, 2022, the so-called “Merge” was successfully completed, reducing the energy consumption of Ethereum by ~99.95%.
Crypto is built on Blockchain technology, and in its initial days, the only users were high-tech personas focused on contributing to the next upgrade. Nowadays, the hype is what drives the majority of price action.
Still, reducing energy consumption is one of crypto’s most significant technological updates. It will be at the center of what future true DeFi projects will be built over.
Governments, institutions, and brands are making their steps in crypto, despite spending years talking against it. Prices might be bleeding, but crypto is here to stay, and the big dogs are joining in.
At the very end of Q3, a new promising economic trend emerged.
While the Euro and Pound rapidly depreciated, investors started accumulating Bitcoin to protect their purchasing power.
Bullish news for new partnerships and acquisitions that would speed up the mass adoption of crypto emerged. The bear market’s end seemed close.
Those who have managed to survive the 2022 winter until that point were even willing to help. FTX CEO and “philanthropist” Samuel Bankman-Fried (SBF) even went on a mission to bail out bankrupt crypto companies.
Which was going great until FTX was the one that needed a bailout.
Google Cloud Partnered With Coinbase For Web3 Crypto Payments A promising partnership between Google and Coinbase was announced on Oct 11, 2022, that would enable specific customers to pay for cloud services with cryptocurrency.
Google Bets On Crypto: Weekly Newsletter #022
Despite the negative CPI results from last Thursday, Bitcoin recorded a 5th consecutive week of inflows, according to…
FTX, Alameda, and Its Related Companies Crashed (November) FTX collapsed due to a lack of liquidity and mismanagement of funds, followed by many investors’ withdrawals. The value of FTX’s native token, FTT, plummeted, dragging down other coins, including Ethereum and Bitcoin, to a two-year low on November 9. Other exchanges were impacted by the collapse of FTX, including BlockFi, which declared bankruptcy on November 28.
Sometimes reality can hit hard. Being likable and with good intentions on first look is dangerous. Not being critical of a multibillion-dollar company and providing audits has its costs.
Decentralized finance has always been the answer to everything FTX did wrong. Transparency on the Blockchain and hard-coded rules that can’t have loopholes after proper audits are the real future of money.
Mass adoption is growing by the day, and everyone is joining Web3. The “dot com bubble” phase of crypto was perhaps unavoidable, but now it is time to build sustainable projects beyond the hype.
The Big Takeaway From 2022
Market cycles come and go, but the big picture remains in crypto. The desire for decentralized payments, Web3 experience, and self-custody financing reached the point of no return and are here to stay.
Before 2022, DeFi grew exponentially, leaving room for mistakes we had to learn the hard way this year. Nevertheless, technological advancement remains the number one driver of progress in crypto, even when prices don’t reflect it immediately.
Central bank digital currencies (CBDC) and false Ce(̶D̶e̶)̶Fi projects will continue attempting to steal the spotlight from crypto. Still, Blockchain will remain the disruptive technology upon which true decentralized financial systems will be built in 2023.