Reflecting on 2022: making it through the crypto winter
, 2023-01-26 10:25:29,
The cryptocurrency world saw a dramatic upheaval in 2022, as a string of negative events — which will, apparently, shape the industry’s future in 2023 and beyond — occurred throughout the year. If I had to describe the situation in two words, I would choose ‘losses’ and ‘trust’ (or lack thereof).
With, it seems, many more crypto winter months ahead of us, it’s vital to be able to see the big picture to find our path through the snow. Let’s explore the key trends and events that shaped the past year for the crypto space.
CEX consolidation, growing maturity, and integration with the digital economy
Even though cryptocurrencies as a phenomenon did not die, the appetite for them fell significantly — to the tune of USD 2 trillion, although there are broader macroeconomic reasons for this besides the simplistic reasons often offered. During the past year, the actions of some firms like Three Arrows Capital, whose investments — and the leverage used for them — went the wrong way, led to their ultimate demise.
Alongside overleverage, we witnessed CEXes consolidate for complex reasons (e.g., too much borrowed from elsewhere) and not-so-complex ones, such as a lack of trading volume and liquidity. A lack of volume kills markets, as does a lack of liquidity (see the 1929 Wall Street Crash and post-crash years for details). Still, it’s important to make the distinction between business models weakened due to external factors, internal risk management, FTX…
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