2022 has been a roller coaster ride for cryptocurrency markets. The market capitalization cryptocurrency market has slid from its peak of $3 trillion to nearly $800 billion, in just a span of one year. Most of the top-performing crypto coins have turned red and are witnessing double-digit losses. The crypto investors are on a major selling spree and sitting on tight positions, meaning a dip all around.
Bitcoin, the world’s largest currency, soared to an all-time high of $69,000 in November 2021, then reached at the levels of $47,000 in January 2022, is now trading below $18,000, post FTX downfall. Similarly, Ethereum, which was at its record high of almost $4900 in November 2021, has now fallen to below the levels of $1300.
Why is the cryptocurrency market moving on a descending trajectory, what’s fueling it? Let’s dig deep through this read.
Crypto Market Continues To Plunge In 2023
The entire digital currency market has turned hot red and shows no signs of cooling down anytime soon. In fact, there are few digital coins and tokens, which have seen reeling worse than others.
FTT, the native token of FTX was the backbone of the FTX exchange, has hit rock bottom amid the FTX scandal. FTT which was seen at $26 on September 1, 2022 is today trading at its lowest around below $1. Other currencies such as Solana (SOL), which is referred to as the “Ethereum Killer”, has also seen the worst fall. Solana was trading at $37, its highest in the last three months on November 6, 2022, which has now reached its lowest at $12 levels.
Other altcoins such as Filecoin (FIL), Storj (STORJ), Decetraland (MANA), Apecoin (APE), Flow (FLOW), have plummeted by an average of 20-40% since November, 2022.
The two biggest currencies by trading volume and market capitalization, Bitcoin (BTC) and Ethereum (ETH) have seen massive fall from the huge FTX crash. Bitcoin is now almost trading at its lows around $16,000 levels, and, similarly, ETH, which made its yearly peak around $4,900 levels, is now trading at $1200 levels, as on December 20, 2022.
Contrastingly, Ripple (XRP) and Binance Coin (BNP) are not struggling this much, but they are down almost 9% and 7% respectively. Tether (USDT), USD coin (USDC), Dai (DAI) and TRON (TRX) are among the top gainers on December 20, 2022.
Reasons Behind Crypto Collapse In 2022
Cryptocurrency, which is known for its extreme volatility, has witnessed a tumultuous time in 2022. The prime reason for the market downturn is the downfall of one of the largest global cryptocurrency exchanges, FTX. FTX’s bankruptcy, and its spat with Binance, has not only triggered a huge sell-off in the market but has also reduced liquidity from the crypto market.
Binance, the world’s largest global cryptocurrency platform, was all set to buy rival FTX, but soon walked away from the buyout deal proposal, citing multiple issues with FTX’s finances and regulatory investigations. Binance’s decision stunned the crypto investors and left Bitcoin to tumble to the lowest level in two years, which touched $69,000 in November 2021.
These surprising turns of events, led to a turmoil like situation in the crypto industry , which resulted in high level of distrust and skepticism among the investors towards centralized crypto establishments and on the regulation front.
The FTX contagion effect is quite evident, several questions have now been pointed out on the survival of other trading and lending firms such as Gemini, Coinbase. Experts believe that their survival strictly depends upon their regulation, governance and management practices.
Apart from the FTX sudden fallout and its contagion effect, the rising interest rates and the recent hawkish tone of the U.S. Federal Reserve’s tighter monetary policy has also added fuel to the fire.