December was a calm month for cryptocurrencies, with low volatility and little price change. It was a tranquil end to a dreadful 2022 for Bitcoin and other major cryptocurrencies.
Markets are still paying attention to the drama surrounding the demise of the cryptocurrency exchange FTX, including Sam Bankman-arrest Fried’s and extradition in December. Meanwhile, renewed calls for tighter regulation of the cryptocurrency industry have been made in response to FTX’s collapse.
Experts in the cryptocurrency sector predict that investors will face further challenges in 2023 as rising interest rates continue to pressure the value of risky assets.
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December’s Crypto Market Activity
After FTX filed for bankruptcy, Bitcoin values fell to fresh two-year lows of under $15,600 in November before stabilizing in December.
In December, bitcoin prices rose 1%, reaching a peak of $16,500 in 2022. The price of Ethereum (ETH) fell by 1.4% more in December, ending the year at $1,199. 2022 was the steepest annual loss in bitcoin prices since the 73% collapse in 2018. In 2022, ethereum prices fell by 67.7%.
The crypto winter of 2022 was brought on by rising interest rates, which resulted in a wave of industry bankruptcy filings and drove down the value of the most well-known cryptocurrencies. Tron (TRON), which had the highest performance among the top 10 most valuable cryptocurrencies by market capitalization, saw a 27% fall. The worst-hit stock was Polkadot (DOT), which saw a year-over-year price loss of 83.6%.
In November 2021, the market capitalization of all cryptocurrencies reached a high of almost $2.9 trillion. The market cap for such asset is currently just $798 billion as of the end of 2022.
Continued Fallout from FTX
When the once-valuable $32 billion cryptocurrency exchange FTX formally requested bankruptcy protection in November, the chaos in the market for cryptocurrencies reached a fever pitch. On Nov. 11, CEO Bankman-Fried announced his resignation, and on Nov. 22, FTX filed for bankruptcy in a Delaware federal court.
One day before he was due to give testimony before the House Financial Services Committee on December 13, Bankman-Fried was detained in the Bahamas on December 12 at the request of the United States government.
13th December, the U.S. Bankman-Fried was sued for civil fraud by the Securities and Exchange Commission (SEC), which claimed that he improperly used FTX client cash to promote his hedge fund, Alameda Research. Eight counts of criminal fraud were brought against Bankman-Fried by the Southern District of New York’s US attorney’s office on the same day.
On December 21, Bankman-Fried was handed to American custody after a judge authorized his extradition.
Gary Wang, the former chief technology officer of Alameda, and Caroline Ellison, the former CEO of Alameda Research, both entered guilty pleas to criminal charges in December and are now apparently working with government inquiries into FTX.
According to GlobalBlock analyst Marcus Sotiriou, the reprehensible actions of FTX insiders may actually work to protect the public’s perception of cryptocurrencies. “It is amazing to see how quickly things have fallen apart, given barely anyone was aware of the fraudulent actions just over a month ago. Since people can be convinced that this collapse was caused by fraud rather than a flaw in crypto, I believe this will improve public view of the business, adds Sotiriou.
Bankman-next Fried’s court date is set on January 3. He was freed on a $250 million bail package on December 23.
2023 Cryptocurrency Market Forecasts
Cryptocurrency experienced its worst performance in 2022 since 2018, but investors are looking for a repeat of the market recovery in 2023.
Bitcoin prices are expected to rebound to between $20,000 and $50,000 in the second half of 2023, according to cryptocurrency exchange Bitbank, but only if the Federal Reserve can stop raising interest rates by mid-2023 and start lowering them by early 2024.
Bitcoin will rebound to $30,000 in 2023, according to VanEck analyst Matthew Sigel, who also cautions that it may stay in the $10,000–$20,000 area in the first three months of the year.
Investors have been warned by Standard Chartered that the crypto winter will continue until 2023, causing more liquidity problems, bankruptcies, and a further loss of investor confidence. According to Standard Chartered, the price of Bitcoin might drop by another 70% in 2023, to about $5,000.
The recent dips in cryptocurrency prices and bankruptcy filings, according to Bank of America analyst Alkesh Shah, have clouded the long-term thesis for digital assets and blockchain technology. The top 100 cryptocurrencies have increased by an average of more than 2,000% since the end of 2016, and in 2022, developer blockchain activity increased.
“Over the course of 2023, we anticipate the market value of the digital asset ecosystem to trade in line with risk assets, but we also foresee the possibility of token price divergence as investors shift their attention away from speculative trading and toward the creation and adoption of blockchains and applications that are powered by tokens with utility and cash flows,” Shah says.
According to him, the digital asset ecosystem is still in its infancy and will keep growing in 2023.
While Bitcoin has been around for 14 years, Shah notes that dozens of other blockchains and hundreds of apps have arisen recently and are still in version 1.0.
