At the end of 2021, we noticed that after skyrocketing in 2017-2018, the price of Bitcoin went into a long-term bear market for two years. Unfortunately for the “holders”, this scenario played out in the worst variation.
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Bitcoins were launched after the 2008 financial crisis.
A mysterious creator developed today’s main cryptocurrency as an alternative to fiat money. The former is not controlled by central banks and governments. However, it was the actions of the authorities that could be the main cause of why the Bitcoin price dropped by two-thirds in 2022.
If we take the historical maximum reached in November 2021 as a starting point, the decrease in the BTCUSD rate amounted to approximately three quarters.
At the same time, the value of the US dollar in 2022 was generally rising, as you can see from the US dollar futures chart below.
There is reason to believe that the story begins in 2020 during the outbreak of Covid-19. Back then the US implemented a policy of an ultra-affordable dollar, which was supposed to support the economy during quarantine measures. Respective decisions were made by the Fed and the president. Most other countries acted similarly.
As a result, the multipliers, which measure the amount of money in the economy, started to increase rapidly in 2020.
The economy was saved, the stock markets went up, the labor market did not collapse.
But the unfortunate side effect was a spike in inflation which reached alarming levels in the second half of 2021.
To deal with the new enemy, the Fed changed its policy. In February 2022, the base interest rate began to rise at the fastest pace in its history.
All these “swings”, apparently, had an extremely unfavorable effect on the BTCUSD rate.
Since the end of 2021, when the upcoming increase in the base interest rate was obvious, Bitcoin began to behave like a high-risk technological investment asset, i.e. its price began to fall. Money in the global economy was “burning”, which made the cryptocurrency market especially “hot”.
At the same time, two more factors came into play:
350 new scam tokens were created daily in 2022, according to Solidus Labs.
As the price of Bitcoin declined, it was followed by a series of major bankruptcies and liquidations of positions on cryptocurrency exchanges.
In addition to the bankruptcy of the FTX exchange, one can single out the collapse of the Terra project, which is associated with LUNA and UST tokens. It became the largest in the history of cryptocurrency in the summer of 2022.
The SEC claims that Do Kwon, the founder of the Terra project, withdrew up to $80 million from Terra funds every month. In total, he personally withdrew up to 2.7 billion USD in LUNA and UST tokens.
A South Korean court issued an arrest warrant for Do Kwon, who is wanted by Interpol.
The total losses of Terra investors exceeded 40 billion USD. They hope that Do Kwon will be found and arrested, and so will be the founder of the FTX exchange, Sam Bankman-Fried. On December 13, he was arrested in the Bahamas, but on December 22, Sam was released on bail of 250 million USD.
The total loss of cryptocurrency investors in 2022 amounted to more than 2 trillion USD. The capitalization of the cryptocurrency market decreased from 3 trillion to 800 billion USD.
Analyzing the cyclical repetition of Bitcoin price movement, it can be noted that the stage of the so-called crypto winter averages about 1350 days.
Fundamental factors aside, this means that in 2023 another transition from the “crypto winter” phase to the “bullish growth” phase may occur.
Assessing the proportions, one should expect that the “bulls” will aim for six-figure levels.
To add credibility to this article, we present twenty predictions from cryptocurrency market experts.
In general, experts’ forecasts are consistent with Musk’s tweet that the winter may be long, but Bitcoin will survive.
In our opinion, the following three conclusions can be drawn from 2022:
To use volatile fluctuations in the cryptocurrency markets to your advantage:
The ATAS team wishes you successful trading in 2023!
Information in this article cannot be perceived as a call for investing or buying/selling of any asset on the exchange. All situations, discussed in the article, are provided with the purpose of getting acquainted with the functionality and advantages of the ATAS platform.
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