Crypto 2022 recap

The year 2022 saw some important technical developments but also moments of crisis in the crypto sector. These were mainly due to a series of bankruptcies that occurred throughout the year. This made investors much more cautious and caused asset values to fall. Indeed, for the cryptocurrency world, 2022 was the worst year ever. It ended, for example, with a very negative Bitcoin performance (-65%), which can’t be ignored within our crypto 2022 recap. 

Crypto 2022: bankruptcies and critical events

As part of our crypto 2022 recap, we must acknowledge that many companies in the sector had a difficult year. Prominent bankruptcies include those of FTX, Alameda, BlockFi, Celsius, Voyager and Three Arrows Capital. 

This major deleveraging was spurred on by Terra’s collapse, which was the first domino to fall.

Additionally, a number of Bitcoin miners, funds and other cryptocurrency businesses have struggled to remain afloat.

Many ‘Alt-Layer-1s’, such as Solana, Avalanche, Terra and Near, have suffered large losses. The majority have seen a fall of about 90%. For example, the value of Terra’s LUNA decreased by 99.99%.

Market capitalization 

Of course, within any crypto 2022 round-up, market capitalization is an important consideration. The market capitalization of cryptocurrencies rose to an all-time high of $2.9 trillion in November 2021. Since then, it has fallen 65% from $2.2 trillion to its end of year level of $770.5 billion. 

DeFi TVL has also witnessed a decline of 76% from over $170 billion to $40 billion. Given that it is mostly made up of unstable cryptocurrencies, this drop is consistent. However, TVL was impacted more by unfavorable price changes than by consumers withdrawing money. 

Furthermore, DeFi yields have fallen since their summer 2020 peak.

NFTs

The third part of our crypto 2022 recap is a discussion of NFTs. 2022 witnessed the first real hype cycle in the NFT market, which peaked in March before seeing sharp drops. Despite the recent dip in trading volume and asset prices, the NFT market has reached a wider base of investors.

The market capitalization of all collections featured on NFTGo peaked at $35 billion in March. Although it decreased 40% to $21 billion by year end, it has expanded significantly from $91 million in early 2021. In the next section of our crypto 2022 round-up, we’ll also discuss new developments that have taken place.

Similarly, the first half of 2022 saw a peak in NFT trading volume. The weekly total reached a record-breaking $1.3 billion in April 2022. Trading fell to $115 million in December. Notwithstanding this 91% decrease, the current weekly total marks a 340% increase over the January 2021 figure of $26 million.

New developments

Despite the unfavorable market conditions, development work still went on in 2022.

Ethereum and L2 adoption

The most important news in the crypto 2022 market was the activation of Ethereum‘s update (The Merge). The Merge was successfully activated on 15 September 2022. Since then, Ethereum has started validating transactions on its network through the Proof-of-Stake consensus algorithm. As a result, Ethereum’s network has also reduced its energy consumption by 99.5%.

Another part of the crypto 2022 market was the growth of Layer 2 adoption on Ethereum. Of course, Ethereum L2 offers much lower transaction fees than Ethereum L1. Optimism and Arbitrum have both demonstrated the demand for Ethereum L2s and the EVM.

Cosmos

The ‘app-specific blockchain’ of Cosmos also gained traction in 2022. This was thanks to events like the ATOM 2.0 whitepaper release, the Circle chain disclosure and the impending dYdX transfer. Cosmos made significant progress in boosting the visibility and value of the Cosmos Hub. At the same time, it offered an enticing development environment.

zkEVMs

The next development to consider within our crypto 2022 recap is zkEVMs (zero knowledge Ethereum Virtual Machines). zkEVMs are layer 2 solutions with reduced transaction costs and better transaction processing time. This development has attempted to preserve some level of compatibility with the EVM while also combining network effects with scalability. Indeed, this zkEVM development has been one of the more interesting areas of progress for Layer 2s.

‘Alt-Layer-1’

These are blockchain networks other than ETH and BTC. The ‘Alt-Layer-1’ trade in the crypto 2022 market was adversely affected in Q3 and Q4 by a number of events. For example, CeFi insolvencies, a surplus of block space coupled with falling demand and the growth of Ethereum L2 communities. Platforms such as Solana and Avalanche have taken a significant hit during the year in terms of TVL.

Oracles

The introduction of Chainlink’s staking mechanism was, in fact, one of the year’s most significant changes to the blockchain infrastructure. This is the final development to consider as part of our crypto 2022 recap. Holders of LINK tokens can now stake their assets to increase network safety and gain LINK benefits. Notably, this further decentralizes the protocol and represents a significant change for the oracle provider. This mechanism is addressing the service guarantee and the reliability of oracle data.

Conclusions

In conclusion, even if there was a bear market in 2022, it was an interesting year for the crypto industry. As we have seen in this crypto 2022 round-up, a number of positive events and developments took place. The successful Ethereum migration to Proof-of-Stake fostered the growth of L2 solutions and is a positive trend for the future. Additionally, the amount of venture funding raised by blockchain and crypto companies increased in 2022, almost reaching $30 billion.

Alongside the crypto 2022 market activity, there was significant momentum in terms of legislative initiatives too. There are various new pieces of legislation that clarify how digital assets should be treated. For example, the European Union’s Markets in Crypto-Assets Regulation Bill.

This all suggests that, although 2022 was a negative year, investors are still confident. Not only that, but preparations are also being made for a more robust future.

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