Can the Crypto Space mount a comeback in the final quarter of 2022?
The story has been all doom and gloom for the crypto space throughout 2022 as falling prices and failed projects reduced people’s outlook on the space. As the year approaches its final quarter, it does present critical times for Crypto to restore investors’ faith and hopefully mount a comeback. The question remains whether crypto can end the year on a positive note or if will we see a crypto winter phase that will drag on to 2023. Let us explore the possibility!
The Statistics so far….
The story so far has not been the way it is supposed to be, especially when we flashback to a year ago. Despite growing concerns about the pandemic and slowing down of the economy, the crypto space was riding high on the strides to its peak resulting in predictions that the growth will continue to 2022 and beyond. Cryptocurrency also becomes the best-performing asset class not only within 2021 but also the entire decade as its annualized returns of 230% outperform other established assets such as Gold and the S&P 500.
This not only led to a growth in the global crypto population by 178% throughout 2021 but also its market cap which hit its all-time high of $3 Trillion by November 2021 as more people were eager to get into the action. Institutional adoption and investments also grew in 2021 as more than $30 Billion were poured into the space to further fuel its developments. This all eventually resulted in higher prices for the cryptocurrency themselves as words like Crypto ETFs, NFT and Metaverse became a common thing across the year.
Data from analysis suggested that across the year 2021, investors from around the world realized the returns of $162.7 Billion — a growth of over 5x its 2020 numbers at $32.5 Billion. Leading the way are your well-known networks like Ethereum, Bitcoin, and more impressively Solana which managed to grow by more than 250x throughout 2021. This eventually cemented crypto as one of the go-to destinations for investment, especially amongst the younger generation of Millennials and Gen Z.
As analysts and experts lay out their predictions of the crypto projects that are going to boom in 2022, a lot of question comes up about whether this impressive growth is sustainable. Unfortunately, it’s not as the crypto space heads for a U-Turn and the price starts to tumble down. Most of the cryptocurrency space growth has been on a bubble ever since 2018 and has to burst for it to return to normal prices and fair valuations.
A lot might be said about the external factors that are ruining the outlook for the crypto space but one of the simplest reasons can be found in the word Interest Rate. As the government raises its interest rate through the “Tapering” mechanism, it is also the way to pull out the incentive from the economy, and interest on riskier assets such as crypto begins to falter. There are also internal factors such as the absence of proper regulations and the high number of scam crypto projects that do not help boost the outlook either.
Some of those cases such as the fall of UST which was deemed stable or the hedge fund that pretended to be a bank at Celcius also provide a negative impact on users who are eager to enter this new space. Currently, throughout 2022, the Crypto Market Cap has lost 60% of its value while Bitcoin has slumped to below the $22,000 mark as analysts predicted that a long drawn-out Crypto Winter phase is upon us.
The story is also not great behind the scenes either as Layoffs and Bankruptcy are common things amongst Crypto Institutions around the world. Of course, with cryptocurrency trading and exchanging being one of their main sources of revenue, this crypto winter feels like an eliminating factor for institutions that have proper fundamentals and management structure with the ones that are overexposed. Firms like Voyager and 3AC are some of the big headlines for insolvency this year while Coinbase and Gemini had to opt for layoffs.
With all this passing by, 2022 has also seen some positive notes in terms of its growth and sustainability as Ethereum 2.0 should enable the DeFI ecosystem to continue its stride. It has also seen a massive improvement in terms of regulations as regulators are much more open to collaborating with Cryptocurrency Institutions instead of the against stance in 2021. We can see this in the form of the growing amount of licenses given to VASPs around the World and the implementation of Travel rules by the FATF to improve the compliance of DeFI.
We can also take some positive notes on the growing number of Users within the Crypto Space which is at 320 Million so far and expected to reach 1 Billion people within a couple of years. This growth is also fueled by the rising global crypto adoption index around Asia and Southeast Asia region as countries like Vietnam, India, and China are amongst the top 10. These Asian countries with their huge population should be enough to ride the Crypto Winter storm until the next boom comes along.
Finally one of the often overlooked positives from this year 2022 is that the Market Crash has been a lesson to all investors to be better Holders for the years to come. As Scam and Overhyped Crypto Projects get wiped out, what remains in the market are projects that have potential in the future and this is good news for the future outlook in the crypto space. But with all this in mind, can they mount a comeback in 2022?
Is a 2022 comeback possible?
Crypto is still a maturing market and while it is strange to see a slump that rapid in any asset class, market crashes are a part of the cycle that happens to every asset class out there. Cryptocurrency is a different case because it hasn’t established proper support and resistance for investors to know the right value of these new digital assets. This is also why it is difficult to predict on what level a comeback is considered a justifiable one.
With an economic downturn and a recession looming in 2023, it will be a monumental and slightly impossible task to consider that digital assets will come back to their pre–crypto winter levels. As interest rates are increasing in major countries, it makes it difficult to pour investments as loans become more expensive and stable assets more lucrative.
This also isn’t helped as the crypto space is still seen as a speculation scene instead of a technology that can spur innovation and growth for the years to come. It will take some time for investors to recover from all the fiasco happening in 2022 but it will take a new updated regulations and verifications system that will ensure that this new technology is not misused again. If it is ensured, then the growth of the Whole Crypto Market Cap to its June 2022 level of $1.2 Trillion should be an achievable target.
There is still a lot of untapped potential within the crypto space and with a growing userbase from year to year, a comeback is always possible down the line. This is also why the next few weeks for Crypto will be essential in whether it can claw down the deficit or we are entering a recession that will put more pressure on the crypto space but a great crypto project should be able to withstand the storm, therefore choose your investments wisely!
We in Nagaya Technologies Pte. Ltd is well aware of the volatile nature of the crypto space and that is why we believe that a cryptocurrency should more important than all to have an intrinsic value as it forms the backbone of any asset instead of just Market Value. That is why we decided to create the world’s first hybrid crypto asset called Nagaya with this idea in mind. Nagaya is a crypto asset that is backed by gold to strengthen its intrinsic value while also running subsidiary projects to continue to provide benefits to all our HODLers. For more information regarding the latest updates on Nagaya and our whitepaper, you can visit us at nagaya.io
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