“That really got out of hand fast!”
We’re now half way through 2022. We’re in the grips of a rampant bear market, and the word ‘recession’ is being quoted far more often than we can be comfortable with. It’s official — crypto is falling.
The global market is falling, too. We’ve had war break out in Eastern Europe, and record high inflation levels coming out of the world’s leading economy, so it’s no wonder.
That’s why, in this half year newsletter designed to provide some insights into what’s been happening in crypto this year so far, we’ll not just be looking back, but also looking forward.
Well, we all know what’s been happening…
- Most crypto markets halved in value between January and June. Bitcoin is down over 50%, Ethereum over 66%, Solana over 75%. Global market cap is down by over $1 Trillion, meaning over half of crypto’s value has been wiped out since January 1st.
- Terra and TerraUSD collapsed completely. Nobody saw this coming. In the space of a few short days, TerraUSD lost its pegged position against the US Dollar, and Terra fell from being worth over $100 in April to being worth less than a Shiba Inu (coin, not a dog) in May. Today, Terra trades at $0.0001.
- India started taxing cryptocurrencies. 30% of income from crypto assets is now taxed in India. The move dramatically affected trading activity in the country, with one of its leading crypto exchanges, WazirX, now looking to relocate its exchange to the United Arab Emirates.
It wasn’t all bad though…
- Dubai became the Wall Street of cryptocurrencies. The UAE Emirate opened the doors for cryptocurrency exchanges to become fully licensed businesses in the city, whilst also moving to create an oversight structure that protects traders’ assets. A good move all round that has seen major exchanges move to locate themselves in the region.
- Major, major partnerships…Binance has really led the way with this, recently partnering with the GOAT (other opinions are accepted) Cristiano Ronaldo to both promote cryptocurrency and facilitate the release of unique NFTs for the football superstar.
- Markets are ‘undervalued’. There’s a lot of downward pressure on markets at the moment. And, while there are some pretty dramatic statistics that highlight the extent of crypto’s plight in 2022, it’s not anything that the industry hasn’t seen before. So, with that said, crypto might just be a bit of a bargain right now, if you are to trust in the natural cycle of the market…
The Wider Impact
It’s easy to bash crypto when a bear market takes over. Critics point towards a lack of market maturity, general volatility in cryptocurrencies, and that it is prone to having cyclical crashes. Such criticisms should be viewed in context — stocks are going through the same hardship, too. While a global, cross-industry bear market is no good for anyone, if we are to really view this event critically, we can see that crypto has become a truly viable asset class. The next breakthrough for crypto will be to become an asset that is held through times of economic difficulty, rather than being offloaded for cash.
What Comes Next?
- All eyes on the United States. We can expect to hear further announcements about the condition of the U.S. economy in good time. The U.S. Federal Reserve is being pushed to keep communication channels clear and open with any updates; the impact of any comms will be felt throughout the market.
- Gains or Falls? The market is looking for a reason to be optimistic. Having experienced possibly the roughest 6-month market conditions since the global financial crisis of 2008, markets are at something of a crossroads. We are yet to see whether crypto will continue on its current path, or take a turn for the better. The outlook isn’t positive in the stock market, and we will find out sooner rather than later in crypto itself.
- Cheap Crypto! With all that said, remember that crypto markets are down over 50% overall. The gap between its full potential and the current reality at this moment in time is vast, and there’s a chance the gap could continue to widen. While the reasons for this aren’t to be desired, they do mean one thing — cheaper crypto. This could be enticing to new entrants, who will play their part in driving prices back up.
One message is clear for the coming 6 months: traders must take care. The waters of the market are choppy, and we have no clear vision of how long we’re going to be in bear mode for. Keep your eyes peeled on developments from the U.S., any further developments in Eastern Europe, and make sure you are only investing what you can afford.
Crypto markets are cyclical, and the bull will run again. Hang in there.
The ZB Team.