Author: CryptoConsultz Consultant Reilly Combs
Is this probably a statement from peers or a headline from the mainstream media that you have heard a lot this year? According to 99bitcoins.com, Bitcoin and cryptocurrencies have actually died 466 times. That’s funny because last we check, the market cap of the cryptocurrency industry is still worth hundreds of billions of dollars and institutions are still preparing for this undeniable future and are even “buying the dip” on some cryptos.
But yes, to say the least, 2022 has been a rollercoaster. Are you missing the bull market yet? We certainly are over here at CryptoConsultz. This bear market has definitely not been for the faint of heart, but if you believe in crypto’s future like we do this is no time for panic.
How did we get here though? Stocks and cryptos only go up, right? Time to get real for a moment. You can’t just print trillions of dollars worldwide and not expect any ramifications. The consequence is inflation and it’s heating up fast. As we were rolling into this year, the Federal Reserve started to see this as well. So much so, that inflation was as high as 8% at one point this year. As many of you probably know already, the Federal Reserve has had to hike interest rates five times so far with the potential of a sixth hike in December to combat inflation. Increases in interest rates makes debt more expensive, create selling pressure on risky assets, and force companies to become more lean. This has caused negative ripple effects throughout the financial markets this year. The Dow Jones, S&P 500, and NASDAQ are down 6.5%, 16.5%, and 29% year-to-date respectively shown by CNBC. This is no different within the crypto market either.
According to CoinMarketCap, the total cryptocurrency market cap has fallen from ~$3T to the $800B to $1T range. Bitcoin has fallen from ~$69k and Ethereum from ~$4700. While these drops look extreme, there were a few collapses that multiplied the impact of these price drops throughout the entire crypto market. Due to poor risk management procedures, while monetary policies were more relaxed, these companies began to get exposed to the downside risk effects caused by the formation of a bear market throughout the early months of the year. It all began with the Terra Luna crash in early May. Leading up to the crash, Terra Luna was able to offer an attractive APY offering, which flooded money into the ecosystem and helped make it a top-10 project. Due to Luna’s success, other companies had exposure to their products or had invested in the underlying project itself. Once the project collapsed, several followed. Hedge Fund Three Arrows Capital and companies like Celsius, Voyager, and BlockFi all failed soon after due to direct exposure and or customers exiting out of similar services offered by other companies that proved to be unsustainable. And more recently, FTX.
These collapses will lead to more regulation in this industry. Just throughout 2022, there have already been two acts introduced. The Digital Commodities Consumer Protection Act of 2022 and the Lummis-Gillibrand Responsible Financial Innovation Act. Just within the most recent election, there are also more crypto-friendly politicians in the government now that will help push the industry forward with proper policies. Whether you welcome additional regulation or not, it will serve to protect innocent people from losing money from improperly managed or fraudulent companies. There is also positive change happening within the industry itself too though. Many companies and exchanges have already pledged to show Proof of Reserves, so their customers, clients, and or partners can easily view the financial health of the company.
While this crypto winter could be a while due to the actions made by the Federal Reserve and the collapses of some companies, there are still a lot of positive advancements happening within the industry. In crypto, it is important to “watch what [people] do, not what they say” especially when it comes to outsiders from traditional financial institutions. TradFi has been notorious for bad-mouthing the crypto space because it threatens its control and market share. If you dig deeper though, their actions behind closed doors speak much louder than their words in front of regulators. During this year, legacy financial institution, Fidelity, became more vocal about crypto and later released a crypto trading product for retail investors after doing a pilot run for institutional investors. MicroStrategy, a publicly-traded software company that is led by Bitcoin advocate Michael Saylor, bought hundreds of more bitcoins throughout this year while the crypto market was “dying”. More recently, JPMorgan Chase & Co. filed a trademark for a cryptocurrency wallet as the company builds out its crypto infrastructure. Lastly, major household names like Nike, Disney, and Starbucks, to name a few, have publicly announced their interest and investments in various blockchain technologies to help better engage with their brand communities through NFTs or future planned metaverses. On-chain data also points to a bright future even during dark times. Throughout this bear market, Bitcoin address metrics have continued to hit new highs. The number of “non-zero BTC addresses touched an all-time high of 42.6 million on 31 July 2022” and “the number of wallets holding at least 1 BTC or more [has] reached 950,000”. Ethereum has also shown positive growth. “Ethereum addresses holding one or more ETH has hit a new all-time high of 1.484 million”. So when you read or hear that “crypto is dead” it is the furthest thing from the truth. The media may want you to think that, but the actions taken by companies and individuals show otherwise.
Your conviction is the only thing that matters and remember the importance of building in a bear market. This is your time to take advantage of the fear within the markets and set yourself up for success when the tides turn. Staying up to date on the news, reading crypto and blockchain-related books, researching projects, attending conferences and community meetups, and helping others who are interested in getting into the space all help you to be more successful in the future.
If there has been one lesson learned through all this turmoil though, it is the importance of self-custody. You don’t have to wait to be saved by regulation or industry initiatives to help protect your funds. Crypto is about getting that control back and taking responsibility for our own assets. The common saying, “Not your keys, not your Crypto”, couldn’t have been more true this year. So, during this holiday season, reward yourself with the gift that keeps on giving and protect yourself from scams and exchange meltdowns by learning how to manage your crypto on a hardware wallet device. Schedule a consultation with CryptoConsultz TODAY!
Market Update (As of 12/08/22):
- Number of Cryptocurrencies: ~21,982
- Total Market Cap: ~$859B
- Bitcoin’s Price: ~$17,225
- Ethereum’s Price: ~$1283