2022 has not been a year for the cryptocurrency market. The year has been marked by crypto winter conjoined with sell-off, scandals, layoffs and unfavourable macros and markets. The shutdowns, rug pulls and the contagions that followed, further added to the crypto markets' misery.
The market is full of debt due to the rise of centralised lending schemes. Since the year 2020, the industry has seen a huge build from retail, yield-based DeFi, crypto shadow banks and unsecured or undercollateralised lending.
The pain started for the cryptocurrencies with a sustained sell off. For the current year, the prices have declined sharply, down by 60 percent for Bitcoin, Ethereum down 64 percent, decentraland Mana down 88 percent and meme coins Doge and Shiba Inu down 47-72 percent.
The total crypto market capital hit a peak at nearly $3 trillion, but the market cap has now come crashing down to below $ 1 trillion, a decline of more than 70 percent.
The crypto sell off was accentuated by the collapse of the algorithmic stablecoin TerraUSD. It was clear from the events that followed that the credit risks and counterparty risks were not assessed with vigilance. Down went the Celcius network, which was once valued at $20 billion. 3arrow capital, Nasdaq-listed Equinox, Vauld, and Voyager digital suffered the same fate.
Towards the end of the year, the once-valued at $32 billion, FTX crypto exchange made headlines and triggered a meltdown in the market after it filed for bankruptcy followed by BlockFi and Bitfront in Singapore. NFT — which was on track to become a mainstream phenomenon in 2021 — also suffered a meltdown in 2022, a 70 percent fall year-on-year.
And there is more. Due to the fall in crypto prices, miners have not paid electricity bills which lead them to sell their holdings.
The total number of cryptocurrencies at present stand at more than 10,000. In the last decade, nearly 2,421 cryptos have failed. When the market began to tumble, funds, and lenders among others were forced to sell, leading to a domino effect.
The Street believes that 2022 may be drawing to and end, but the crypto winter could last for another 6-8 months.