Bitcoin has had a tough 2022. In fact, 2022 has been one of the most tumultuous years for crypto at large, not just Bitcoin specifically. The bear market rage of 2022 has resulted in many decentralized and centralized crypto firms evaporating into thin air – resulting in staggering loss of value from this nascent market.
However, looking a bit further back – this can be categorized as a filtering activity of sorts – weeding out of bad actors and poor solutions, in the evolving maturity process of a very young ecosystem. Now, I am not saying that all of a sudden all of it will go away and everything will be sunshine overnight – however, there is definitely some light at the end of the tunnel, so bear with me.
But instead of talking about the crypto market as a whole, let us take a look at Bitcoin specifically – since its near 40% market capitalization dominance outweighs all other factors of consideration. This is also because of a couple of other reasons – ranging from the overall trust on Bitcoin as being the only truly decentralized token with no founder and the least scope for the likes of an exit scam and the fact that Bitcoin is almost synonymous to the word crypto, for the layman.
With that in mind, let’s take a look at how Bitcoin has performed in the past year of 2022.
Bitcoin Price Performance 2022
Long story short – the bear market of 2022 has been very hard on the grandfather of cryptos. Bitcoin has been beaten black and blue all through the past year – and not just because of the bear market but mainly because of the multitude of catastrophic collapse of crypto firms left, right and center – not to mention a myriad of multi-million dollar scams that rattled the market all through the year.
Read more: Bitcoin Price Prediction
The first trading day of the year 2022 began with Bitcoin trading around $46,000 (seems like a dream right now, doesn’t it?) and has been falling ever since. By the third week of January 2022, we were down below $34,000 at one point before seeing a strong recovery all the way up to $48,000 by the end of March. It almost seemed as if a breakout above the $50,000 mark was very close at hand. But by the month of May 2022, all hell broke loose as the first major collapse of the year – the depegging of Terra’s algorithmic stablecoin UST and the eventual crash of the LUNA ecosystem. That alone pushed BTC price into the low $20k region and since then Bitcoin price hasn’t been able to breach past the $30,000 mark ever again in the year.
Then we saw the effects of the United States’ Federal Reserve’s quantitative tightening measures kicking in, pushing all major asset classes into the red, including cryptos, equities and the likes. The old adage still holds true, when the US sneezes, the world catches a cold. We saw that play out in the month of June 2022 – when Bitcoin touched a lot of about $18,000 in a matter of a few days. Back then, this was the first time Bitcoin had touched these levels since December of 2020!
This period broadly went on for some more time, when we saw several more crypto firms collapsing and filing from bankruptcies and what not, ranging from Celsius, Three Arrows Capital and several others. Then came the month of November 2022 – and the catastrophic collapse of the FTX crypto exchange – the third largest centralized crypto exchange in the world. That was the last major blow of the year 2022 that resulted in BTC price touching lows never seen in the past two years! And two years, in the brief history that the world of crypto has had, is a big deal!
Bitcoin is down about 62% as of writing this article, since the beginning of 2022 and for all practical purposes, a recovery is nowhere to be seen yet. However, there’s a caveat. 2023, as a year is expected to bring about a few things that could potentially help in the process of recovery going forward. Let’s look at some of the most prominent ones.
Additional read: Biggest crypto scams of 2022
1. All hail the US Federal Reserve
As anybody who is vaguely familiar with the global macroeconomic situation post the covid-19 pandemic that struck the world and brought it to a halt in 2020, governments across the world had been undertaking measures to bring about fiscal discipline. During the global lockdown, all these governments were on a quantitative easing spree which had to be mopped up and that began in the middle of 2022, when the Fed, followed by the central bankers of all other nations began a policy to strict quantitative tightening policy to pull out some of the excess liquidity in the markets.
However, on the brighter side – it is widely being expected that the US Fed will be easing down on the quantitative tightening by the third quarter of 2023 and change their stance from hawkish to dovish – which would be a strong positive for all investment asset classes, including cryptos and especially Bitcoin. So that’s one of the biggest things we have to look forward to in 2023.
2. Crypto regulatory breakthroughs expected
The year of 2023 can also be a very positive year for the industry as a whole, and effectively Bitcoin too as it is widely being expected that governmental regulatory steps are going to be put into place for the development of this industry and aid in its growth.
According to an article by CoinDesk, crypto market analyst Andrew Keys believes that the centralized finance disasters of 2022 – which were a result of poor risk management, insufficient governance, incomplete audits and even potential fraud – have put governmental agencies at the edge of their seat. While up until 2017-18, the crypto industry was far too small for anyone to notice – this time around the scale and quantum of money lost has been huge so it becomes crucial for regulatory authorities to take notice. According to Keys, a majority of emerging policy decisions would primarily be around centralized exchanges and stablecoins.
This can be expected to have a trickle down effect into the Indian economy too, especially with the Budget for the financial year coming up in India in less than a month – all eyes are fixed on that. Some reliefs on the tax and TDS front could be a potential game changer for the industry in India.
3. Web3 to change the landscape
While the term cryptos have mainly been at the center of the conversation here in India and all across the world, as of late – the broader umbrella term of Web3 has begun to gain more and more prominence and momentum globally. While the perception of cryptos as currencies have been harmful for the industry as a whole, as sovereign government looked at it as a threat to their powers – the industry’s pivot towards the broader Web3 scenario, and the real world problems that Web3 can solve are becoming common knowledge both within and outside the industry. This would be hugely beneficial for the industry as a whole and could bring about price appreciations in cryptos like Bitcoin.
4. Bitcoin could continue to lose market share
Well, yes. Historically – Bitcoin has been a coin that has been leading the market. It has had anywhere between 50-75% market capitalization dominance for a better part of the past four years now – from the beginning of 2019 to the end of 2022. Take a look at the chart below.
However, in the year 2021, we saw a major slump in Bitcoin’s dominance in the overall crypto market capitalization thanks to the skyrocketing popularity of Ethereum and other layer-1 blockchains with network speed and efficiency which are exponentially higher than that of Bitcoin. So in the first half of 2021 alone, amid the raging bull market – we saw Bitcoin’s market cap dominance plunge from over 75% down to under 40%. And since then, it has remained around the 35-45% range in the next year and a half.
So while, we spent a large portion of the article above saying that crypto and Bitcoin could potentially rally – here’s the caveat. Bitcoin too will rally but other altcoins with far greater use cases and scalability will be able to eat into the king coin’s market cap. It will usher in the highly exciting ‘altcoin season’.
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Well, in conclusion – the year of 2023 can be expected to be fortuitous for Bitcoin too. While it may lose market share, that doesn’t mean that it will lose out in value. This is the natural progression in any open market where newer and better players rise up and offer better solutions and thus are able to reach more people and gain more value. This would also directly result in the overall progression and growth of the crypto industry as a whole too. Win-win!