Crypto fell into a year-long hangover after a euphoric 2021. Yet there could be silver linings.
Crypto’s 2022 was one of the most consequential and difficult years on record. After an extremely bullish 2021 that saw Coinbase go public in the largest direct listing in history, the first bitcoin exchange-traded fund and the inaugural cryptocurrency almost reach $70,000 on two separate occasions, the market saw a dramatic reversal.
While high-profile collapses like stablecoin terraUSD and its sister token luna, and of course Sam Bankman-Fried and the rapid demise of FTX, will capture headlines and get most of the blame, crypto also ran into massive macro headwinds as the U.S. Federal Reserve and its central bank counterparts around the world began to unwind the massively accommodative monetary policies instituted at the onset of the coronavirus pandemic.
Despite these struggles, the verdict for 2022 will remain unknown for several years. For instance, optimists are looking to the bankruptcy cases of FTX, lender BlockFi, and hedge fund Three Arrows Capital among others as a necessary culling of either fraudulent or irresponsible firms. If regulators use these unfortunate cases as the final push needed to take meaningful action on crypto, there could be a silver lining to all of this pain.
But until then, here are six figures that defined crypto in 2022.
The total drop in crypto’s total market capitalization in 2022. The figure read $2.3 trillion on January 1, 2022. Today it is down to $843 million.
This drop does not even capture the full extent of the climbdown, as the value actually peaked on November 8, 2021, when it crossed $3 trillion.
The last time that crypto’s market capitalization was this low was January 2, 2021, which was the very beginning of the pandemic-driven crypto bull run.
The percent that Coinbase’s stock value declined in 2022. COIN began the year at $251.05, before falling to an all-time low of $34.23.
The poor performance can be attributed to many factors, most notably falling crypto prices which has a negative impact on customer sign ups and trading volume, the latter of which accounts for more than 80% of Coinbase’s revenue. The stock was further hit following the terraUSD/luna crash in May and the FTX bankruptcy in November. Even though Coinbase was largely immune to direct exposure from both entities, its status as a crypto bellwether weighed on its price.
Coinbase was not alone among crypto proxy stocks in its struggles. MicroStrategy, the world’s largest corporate holder of bitcoin, is down 70.61%, and Marathon Digital Holdings, one of the largest publicly traded crypto mining firms, fell 89%. Silvergate Capital, a California-based bank that caters almost exclusively to crypto companies is also down 89%. Silvergate is being particularly hard hit by its association with FTX, whose fiat-currency deposits at the bank accounted for about 10% of its $11.2 billion base.
However, it is worth pointing out that COIN and other crypto stocks were not alone in struggling during this difficult environment. Prominent tech stocks such as Amazon, Netflix, Zoom, Meta and Tesla are all down more than 50% this year. However, these stocks turned upward in November while Coinbase continued its descent following the FTX bankruptcy.
This number represents the amount of unique active wallets (UAW) participating in blockchain-based games. Builders keep building as they look for the killer applications that will move the industry beyond speculative mania. One sector that saw notable growth this year was blockchain-based games. According to a report from DappRadar, games became the most popular sector this year based on a metric called UAW that tracks how many independent wallets interact with an application. As the chart below displays, its user numbers grew 65% year on year. The top two titles were battle games Splinterlands and Alien Woods.
By comparison DeFi applications only grew 2%. In fact, the total amount of value locked (TVL) in DeFi applications fell by $125.3 billion. TVL is not a perfect metric, because it is largely a reflection of the spot value of assets held in DeFi and declining values do not necessarily indicate an outflow, but it is an important data point. Many entrepreneurs hope that verticals such as DeFi and blockchain games will become cross-pollinated in the years to come and create symbiotic relationships.
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This is the amount Sam Bankman-Fried, founder of crypto exchange FTX claims to have left in his bank accounts from a fortune that reached as much as $26.5 billion in DATETK placing him at #32 on the Forbes 400 list. He is currently out of jail on a $250 million bond, secured by his parents home in Palo Alto, CA, where he will remain restricted to until his trial. Bankman-Fried is currently facing eight counts of fraud and conspiracy as well as separate civil charges from the SEC and Commodities FuturesTrading Commission. For Forbes complete coverage of of FTX’s collapse click here.
The amount of crypto that has been stolen this year by hackers and fraudsters. While the debate continues regarding crypto’s actual utility to hackers–on the one hand they are bearer assets but on the other everything on a blockchain is theoretically traceable even years after the fact–there is no denying that bad actors see the asset class as a juicy target.
According to crypto forensics firm Chainalysis, October (the last month that data was available), was the worst month for hacks on record ($718 million stolen).
A particular target for hackers this year was bridges, portals between blockchains that allow users to transfer assets from one platform to another. At least $2 billion of the total stolen has come from bridge hacks, with the two biggest being a $320 million February attack on Wormhole, which connects Ethereum and Solana, and a $600 million exploit in March of Ronin, a bridge used by players of the blockchain-based game Axie Infinity.
The number of Congressional hearings held this year that primarily focused on crypto and blockchain policy. The most active committees were the Senate Banking and House Financial Services panels, which dedicated time to everything from trying to understand the implications of privately issued stablecoins for the U.S. dollar-centric financial system to trying to figure out how Congress can ensure that major blow-ups like FTX never happen again. There is optimism in some crypto circles that the magnitude of FTX’s collapse will inject a sense of urgency into lawmakers to make meaningful progress next year.
Part of the challenge for lawmakers includes settling turf wars between competing agencies looking for primacy in the crypto market. The SEC, led by Chairman Gary Gensler, has taken a regulate-by-enforcement approach to the industry, relying on specific actions such as filing insider-trading charges against a former Coinbase employee and his associates as well as celebrity Kim Kardashian for promoting a token called ethereum max without telling her followers that she was paid $250,000 to do so. On the other hand, the CFTC is angling for the upper hand. It may take new legislation to settle this debate, and the dividing line may come down to if a determination can be made whether or not crypto assets are securities.