The year 2022 has been one of the worst years for cryptocurrencies. The fall was severe across the board. Bitcoin dropped more than 77%. However, even after such bloodbath, investors remain positive and continue to HODL. Retail crypto ownership touched record highs.
The year 2022 saw a complete bloodbath in crypto. Bitcoin dropped more than 77.5% from $69,045 to $15,600 (approximate values). Even large institutions such as FTX, Voyager, Three Arrows Capital and the infamous Terra LUNA came crashing down. Overall markets saw $1.46 Trillion (as reported by Forbes) being wiped out. Even stable companies like Coinbase($COIN) saw a crash of 86.1% in its market value.
However, retail investors showed cautious investing behavior. Despite the market being at one of its worst states, retail investors showed maturity and accumulated quality cryptocurrencies.
Several times, the Retail Investors are often misquoted as being short term players, lacking wisdom and management. But this statement proved to be wrong when Bitcoin and Ethereum Ownership touched record highs. Towards the end of 2022, Bitcoin wallets containing more than 0.1 BTC reaches 4 Million active users while Ethereum went a bit further with more than 90 Million users holding some ETH.
Further, this also indicates that crypto markets are in much better hands now and at par or even more mature than traditional stock markets.
Towards the end of 2022 and the beginning of 2023, crypto investors saw an opportunity when US inflation came down to 6.5% in Dec, 2022. Consequently, the US Federal Reserve slowed its pace of interest rate hikes and increased it by just 50 basis points(0.5%) in its Dec, 2022 meeting.
Sensing the situation that market liquidity might not fall further, investors ran towards accumulating even further which sent Bitcoin and other cryptocurrencies on a rocket.
Bitcoin grew 42% since the new year and Ethereum grew 41%. CoinMarketCap tracker also shows that there was a significant gain in the overall market too.
Yes, but that depends.
Several cryptocurrencies have made decent gains. Leaders like Bitcoin and Ethereum are over 40% up and many others like Optimism and NEAR Protocol have recorded 2x gains. The markets are expected to continue this behavior if the US inflation rate falls (which is expected to fall till 3.5% by end of 2023) further and there is more liquidity available in the markets.
However, the speed of growth in market cap and crypto prices depend a lot on the behavior of US Federal Reserve. If the interest rate hikes are at 0.5%, the markets will be neutral. However, a 0.25% rate hike will send the crypto markets to further heights.