A crypto roundup of the year and stepping into 2023

Heading into 2023, it’s time to pause and reflect on the achievements and struggles the global crypto community has seen in the last 365 days. From the beginning of 2022, there is no investment strategy that can help recover the declining portfolio in the traditional and crypto ecosystem. January 2022 inherited a slightly collapsed market, where investments made at the high prices of 2021 resulted in immediate losses.

For many, especially newcomers, falling crypto prices are considered the end game. But what is less known is the community’s resilience and achievements against the global recession, organized attacks and fraud and the unforgiving bear market.

As a result of the falling price, 2022 also inherited the 2021 hype about the nonfungible token (NFT), Metaverse, at an all-time high for Bitcoin (BTC) and other cryptocurrencies.

Economies around the world are suffering from massive inflation as the most influential fiat currencies come under constant geopolitical pressure. Falling investor confidence in traditional markets seeps into crypto and the fall of the ecosystem only helps sour sentiment.

A year full of distractions

Amid the market’s underperformance, the crypto community is focused on strengthening its core. This means releasing blockchain upgrades and introducing faster, cheaper and more secure features and capabilities – all driven by the consensus of the respective communities. As a result, 2022 is an important year for the leading crypto ecosystem.

Bitcoin is receiving highly requested improvements to its layer-2 Lightning Network (LN) protocol. LN gets better privacy and efficiency thanks to the November 2021 upgrade called Taproot. Taproot Bitcoin’s upgrade sees multiple protocol-level implementations for better privacy and efficiency. It also helps reduce the size of the database, an important factor in reducing the size of Bitcoin’s exploding ledger.

In May 2022, Bitcoin will be halved to the next halving, an event that cuts mining rewards in half, the only way new Bitcoins are released. The reward for confirming Bitcoin transactions will be cut in half per block of 210.00. The last Bitcoin halving event happened on May 11, 2020, when it traded at the $9,200 mark.

The total supply of Bitcoin is limited to 21 million by design. Therefore, the halving event further reduces the amount of Bitcoin that will be released into the market. The scarcity caused by a historical event that halved the price of Bitcoin.

Adhering to the expectations of industry experts, Bitcoin rallied for several months to mark an all-time high in Nov 2021 and could hold its value above $15,000 until the end of 2022, confirming data from Cointelegraph Markets Pro.

Bitcoin price during the last halving event. Source: CoinMarketCap

The Ethereum community has welcomed the highly anticipated Merge upgrade, which sees the Ethereum blockchain transition from a proof-of-work (PoW) to a proof-of-stake (PoS) consensus mechanism. The most important impact of the upgrade is a drastic reduction in energy consumption. The broader crypto community considers this lower energy use to fuel interest in Ether-power sub-ecosystems, such as NFTs.

Crypto resistance vs traditional markets

History proves that two factors play an important role in the performance of the crypto market – Bitcoin price and investor sentiment. Both factors appear to be lacking throughout the year.

Timeline of Crypto events against market capitalization. Source: CoinGecko

The crypto ecosystem has been disrupted by a series of attacks, unprecedented sanctions and bankruptcy filings, which have added to the impact of the global recession on the market. In addition to poor price performance, some of the most important stocks for investors in 2022 include FTX, 3AC, Voyager, BlockFi and Terraform Labs, where investors lost access to all funds overnight.

In the midst of this uproar, entrepreneurs who were once loved by the masses have finally broken the trust of millions, namely former FTX CEO Sam Bankman-Fried and Terra co-founder and CEO Do Kwon.

Despite the added hurdles, the Bitcoin and crypto ecosystem is not only surviving but also displaying resilience that has never been seen before. Traditional store-of-value investments such as gold and stocks also suffered a similar fate. Between January-December 2022, gold investors realized a net loss of 0.3%.

Major company stocks have also not fared well this year, including Apple (-25%), Microsoft (-29%), Google (-38%), Amazon (-49%), Netflix (-51%), Meta (-65 ). %) and Tesla (-65%).

Annual performance of the traditional market goliath. Source: LinkedIn

Bitcoin started off strong with a price point of $47,680 in January 2022, but waning investor sentiment – fueled by year-on-year inflation, energy prices and market uncertainty – could reduce the price by more than 60% in December.

Setting the stage for a stronger foundation

Time and time again, bear markets have been responsible for eliminating bad actors and providing opportunities for promising crypto projects to present their true value to investors beyond their price point.

The noise around the price fluctuations can not stop the Bitcoin network from strengthening the core against the double spend attempt, ie, 51% attack. Thanks to the widespread mining community, hash rate and network difficulty – two important computing power-based security metrics – assure Bitcoiners that the blockchain network is well protected. Throughout the year, the Bitcoin network consistently recorded new all-time high hash rates and ended the year between the 250-300 Exahashes per second (EH/s) range.

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Other important players in the crypto ecosystem are also releasing systems and upgrading features as they prepare for 2023. For Polygon Technology, an Ethereum-based Web3 infrastructure, this is the launch of zkEVM, or knowledgeless Ethereum Virtual Machine, layer-2. scale solutions aimed at reducing transaction costs and increasing scalability. Decentralized finance (DeFi) aggregator 1inch Network launches Fusion upgrade to deliver efficient, secure and profitable swaps for crypto investors.

The legalization of El Salvador’s Bitcoin has not been ignored, especially since the procurement of Bitcoin in the country from 2021 shares the same fate as other crypto investors. Regardless, the President of El Salvador Nayib Bukele doubled down on this decision as the country announced the purchase of BTC every day from Nov.17.

One of the direct impacts of this move is the reduction of El Salvador’s average purchase price. A planned purchase of Bitcoin dips combined with the subsequent market recovery makes the country well-positioned to offset unrealized losses.

In a country with high inflation, Bitcoin helps many people to retain their purchasing power.

Expect a return from the hype

While 2023 will not be lucky enough to witness the coming half of Bitcoin, it will play an important role in the return of the crypto ecosystem. With aggressive blockchain upgrades, updated business strategies and investor attention back on the menu, the ecosystem is now poised for the next wave of disruption.

For investors, 2023 will be a year of recovery – from losses and distrust to independent investment and information. “Making it” in crypto isn’t just about becoming an overnight millionaire; it’s about creating, supporting and preaching a new take on the future of money.