5 DeFI happenings that surprise us in 2022
2022 is upon us as Bitcoin and the whole DeFI space look towards its 15th Birthday in 2023 and what a ride it has been so far. From the first adoption by El Salvador in 2021 to reaching its all-time high in November that year until eventually going through a Winter phase in 2022, many things have happened through this journey. In this article we want to focus on its milestones in 2022 and what are some of the happenings to occur last year. Here are some of those happenings that surprise us throughout this year:
- Three Massive Collapses in a Couple of Months
2022 was not as everybody in DeFI space as expected with massive progress during the year brought to a screeching halt bringing massive pressure for the firms or institutions. Collapse is a part of a recession as falling prices of digital assets dry up the liquidity of most institutions leaving some of them only those who managed to survive. But the worst part is that we experience three of those in a span of 8–12 months is somewhat unthinkable for many people.
From the fall Terraform Labs in May 2022 wiping out close to $60 Billion from the market to the Collapse of Celcius one month later, two of the top 20 ranked digital assets have disappeared from existence. Just when you thought the damage had been done, the worst was yet to come as FTX the third largest Crypto Exchange had to also follow the same path with numerous losses still unaccounted for.
If we look back to the 2008 financial crash, just one Lehman Brothers moment managed to shake up the financial system and the crypto space now has three stamps in the history of 2022. This paints an unfavorable picture of how vulnerable the DeFI Space really is and the lack of proper Risk Management Structure for most of these institutions, this is not counting for firms like Voyager Digital, Three Arrows Capital, and BlockFI which also filed for Bankruptcy. At the end of all this, the users are the ones at loss and let’s hope 2023 will be a better year!
2. The Economy is on the Up while DeFI seems to be on the Slump
2021 was meant to be a transition phase post-pandemic era while 2022 was meant to be a growth phase in the economy. As lockdown and health restriction were easy throughout 2022, it should see growth in many aspects of the economy. Countries like China and USA defied expectations made by the World Economic Forum posting a growth of 3% in GDP, with developing countries like Indonesia hitting 9-year record high of GDP Growth at 5.31%
With all of this in context, growth in economy should be fuelling better growth for the Decentralized space who are already hitting all times high in 2021 right? Unfortunately, that’s not the case, most of the growth in the economy was caused due to the extreme contractionary measures taken by the government one of them is raising interest rates. This affected the value of Digital Assets badly as there is less money flowing into the space.
We can see this also from the falling price on the NFT Space or the reduced amount of users in the metaverse space as the sentiments around the DeFI space turns sour. With major collapses further reducing the enthusiasm of users to the space but behind all this, there is still a positive outlook for 2023!
3. The Merge is finally done but not as everybody expected
One of the highlights events of 2022 was dubbed “The Merge” as the Ethereum Network will finally complete one of its major steps in transitioning to a much energy efficient Proof of Stake Network. The Merge will combine the Beacon Chain with the Ethereum 2.0 Network should be able to reduce transaction speed and gas fees and gather a lot of hype from crypto enthusiasts who hope that it will move the needle in the right direction.
The Merge is a success in expanding the capabilities of the Ethereum network and securing the future of the blockchain for years to come. Gas Fees have also significantly reduced by 90% from an average of 150 GWEI per block in January 2022 while Transaction speed has increased to a whopping 100,000 transactions per second and improved both the security and stability of the network.
This is all good news if you are in for the development of the Ethereum Network but for most people out there, it’s simply not what they expected. Most people’s expectation was this could be a catalyst for the value of Ethereum and other tokens to skyrocket again which eventually doesn’t happen. Ethereum is on an upward trajectory from its record low at the end of 2022 but this will certainly take a long time and an uphill battle for Ethereum to return to its former glory!
4. The Good Side of Digital Assets
For much of 2020 and 2021, we are exposed to quite a dark side of digital assets from Meme like tokens that ends up being a rug pull to a crazy amount of speculations and risk resulting in massive losses for its users. It’s the law of nature that when prices start to rise and hit an all-time high, there are always bad individuals who will be looking to take advantage of the situation.
2022 managed to show us the other side of Digital Assets when the Ukraine Government announced a plea for Crypto Asset Donations on February 26th 2022. It managed to provide an example of how a Digital Asset could be used to help people in need and how Digital Space provides an easy platform to bring together people for a good cause.
According to a report done by Chainalysis in February this year, Ukraine has received more than $70 Million in crypto-related donations with the majority of the donations received in Eth, BTC and Tether. UkraineDAO was also set up in order to raise Ether that will be used to fund Non — Profit Organizations in Ukraine. This is further proof that the DeFI space can be used for good, it just depends on who are using it!
5. Growing Optimism
From some of the reasons mentioned above, it is fair for all of you to undermine the growth made this year and be pessimistic about the years to come for the DeFI Space. Yes, Bitcoin or Ethereum is not back to their previous highs but steps are being made in 2022 in order to get there.
The growth of Crypto Adoption has been going on an upward trajectory with 2022 achieving new milestones by reaching 39% growth to 425 Million users worldwide and at this current rate, it could reach 1 Billion users by 2025. The global cryptocurrency market was valued at USD 4.67 billion in 2022 and is also expected to expand at a compound annual growth rate (CAGR) of 12.5% from 2023 to 2030.
There is also a recent boom in the Total Value Locked of DeFi that has grown by more than 6,900% since 2020 with its cumulative DeFi revenue increasing by more than 2,100% to $5.22 Billion from its 2021 figures. With a growing user base and Revenue increasing, it should be a source of optimism for all of those enthusiasts who love the space!
