I’m publishing the CoinDesk Research 2022 Annual Crypto Review tomorrow and it’s probably the last annual report you should read since we’re just at that precipice of time where it’s acceptable to look back on the year that was.
Any later and you’re getting too clingy.
The Executive Summary of that report is enclosed below. I hope you consider downloading and reading the full 53-page document on the CoinDesk website when it becomes available.
As with all financial assets, market performance is usually the first thing that comes to mind when considering a “year in review.” Bitcoin (BTC) and ether (ETH) followed a blistering 2021 with a 65% and 67% pullback in 2022.
As for macro assets, their correlation behavior with bitcoin remains an unfinished story. Only bonds ended the year within an uncorrelated band to bitcoin while stock indices maintained a somewhat positive correlation, and the U.S. dollar index maintained a somewhat negative correlation.
These market performance difficulties leaked into bitcoin mining companies as a perfect storm of headwinds led most of the publicly traded bitcoin mining companies to cede an immense amount of value. Of the five largest public bitcoin miners measured by bitcoin hashrate, the best performer was CleanSpark which still lost 79%. Bitcoin’s hashrate marched steadily upward as mining machines purchased in the throes of the bull market came online and that, combined with poor bitcoin price performance, led to general difficulties in the mining industry.
That said, the amount of venture funding raised by blockchain and crypto companies increased in 2022, almost touching $30 billion. While the growth was far slower than it was in 2021, there was still plenty of venture capital invested as the venture funds that raised funds in 2021 needed to deploy that dry powder in 2022.
Meanwhile it was a strange year in the world of policy. While massive legislative efforts like the European Union’s Markets in Crypto Assets (MiCA) bill have crept closer to becoming law, few nations have actually implemented any new laws providing broad clarity for the treatment of digital assets. However, the massive failures in 2022 are likely to create new pressure for regulators to actually do something about the sector.
From a regulatory perspective, we’ve seen a majority of Ethereum transactions comply with the Office of Foreign Assets Control (OFAC) as the U.S. Treasury Department blacklisted the Tornado Cash mixer program in August which led to one of its developers, Alexey Pertsev, being arrested.
And of course, any discussion of crypto in 2022 would be incomplete without discussing our first proper Crypto Credit Crisis, which began with a glut of crypto lenders promising yield to customers in exchange for deposits and culminated with the arrest in the Bahamas and extradition to the U.S. of FTX and Alameda Research founder Sam Bankman-Fried (SBF). It was years in the making and it’s hardly the first credit crisis in financial history, but this one is definitively crypto’s.
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TAKEAWAY: “Due the state of the broader economic environment and prolonged crypto winter presenting significant headwinds to the industry, we made the decision to wind down HQ,” the company said in a statement Thursday. “We’re proud of the work that the team has done and look forward to potentially revisiting the project in the future.” The division reportedly had more than $3.5 billion in assets. Read more here.
TAKEAWAY: Heatbit says its innovative space heaters can warm a room the size of a small studio apartment while mining enough bitcoin to offset at least a portion of a homeowner’s monthly electric bill. Heatbit looks like other high-end heaters. But integrated circuits inside the device quietly process bitcoin transactions and perform trillions of calculations per second.Read more here.
TAKEAWAY: On Thursday, a spokesperson for the crypto-trading firm confirmed in a statement to CoinDesk that Genesis Global Trading, a subsidiary of Digital Currency Group, laid off 30% more of its staff. Genesis previously cut 20% of its workforce in August. “These measures are part of our ongoing efforts to move our business forward,” a Genesis spokesperson said. Read more here.
NLW looks at the macro landscape that will set the tone for the markets in 2023. According to the minutes of the December Federal Open Markets Committee Meeting, released on Wednesday, the Federal Reserve is concerned about investor enthusiasm regarding a theoretical future pivot undermining monetary policy tightening.
In this interview Lyn Alden, a macroeconomist and investment strategist, looks forward to 2023: what’s happening to Japan and China’s economies, whether we are entering a recession, and how will investments, including Bitcoin, perform over the next year?
