Business_It may have been the hottest thing since white bread but Cryptocurrencies are slowly emerging from the carnage of 2022, having experienced one of the worst vears on record. While globally, the economy continues to reel from the aftermath of the pandemic, rising inflation and unemployment, the crypto industry wasn’t left unscathed either with prices plunging to unimaginable levels.
It’s an understatement to state that croptocurrencies had a rough year in 2022 but it’s not over yet as it readies for yet another stormy year ahead. However, all is not doom and gloom. Overall, the global crypto market cap rose 5 percent to USD 871 billion since the start of 2023, although still down by over 57 per cent YoY since the beginning of 2022.
Restrain was observed in cryptocurrency spot trading volumes which slumped 48%, its lowest levels since December 2019, compared to USD 544 billion in November.
According to Standard Chartered Bank, Bitcoin, the most popular cryptocurrency, which dramatically nosedived to unprecedented lows in 2022, could plunge even further to a dismal USD 5,000 in 2023, which is a 70 per cent drop on its current valuation. It warned of a tumultuous market ahead for the cryptocurrency.
Bitcoin prices skyrocketed to an all time high of USD 69,044.77 in November 2021 but dropped steadily from that time. It did gain 4.3 per cent since the beginning of 2023, wedged between a very narrow USD 16,500 and USD 17,300 although predictions remain bleak with Arcane Research not anticipating Bitcoin prices nearing former highs this year, warning of a subdued market.
Bitcoin’s fall from grace ironically began in the circumstances that it peaked when during the pandemic, a flow of new money into cryptocurrencies sparked by the pandemic brought out a segment of home investors with time on their hands and much disposable income. Their high risk appetite added fillip to the cryptocurrency. However, once that milieu started returning to business as usual, the currency lost its lustre pushing investors to sell. This was exacerbated by the recent collapse of FTX, the cryptocurrency exchange, one of the largest marketplaces for digital coins, which at the time was handling approximately USD 1 billion worth of transactions daily.
With 2023 showcasing a weaker economic outlook resulting in less disposable income for high-risk investments like cryptocurrencies, the conventional safety of the US dollar will hold its own this year. While the backdrop for crypto yet looks somewhat bearish, FTX’s collapse, economic headwinds and unemployment rising worldwide, there is no doubt that cryptocurrencies will be on a rocky path at least in the short to medium term.
