Cryptocurrency Market Analysis, what to expect? What were the main issues for the crypto market?
The collapse of one of the largest crypto exchanges, FTX, is causing ripples through the world of cryptocurrencies. Bitcoin and Ethereum are more than 50% down from their all-time highs of late 2021. While there are small surges now and then, the cryptocurrency market trends have largely stalled. While we can’t know for sure, some experts say cryptocurrencies might fall even further before any sustained recovery.
In this cryptocurrency market analysis, we will go through some important events that affected the crypto market and what we can expect moving forward. So, stay tuned as we talk to experts at Bitmedia and prominent market analysts, to find out how to survive as a crypto business and what are the necessary steps you need to take.
What is the Cryptocurrency Market size?
For cryptocurrency, market size is the total value of all the crypto tokens that have been mined. It is calculated by multiplying the total number of coins in circulation by the current market price of the particular coin and adding them all up. The global cryptocurrency market size reached $1,782 billion in 2021, showing tremendous growth potential. However, 2022 has been a year of epic decline, with the market size staggering down to $843 billion.
– How was the Cryptocurrency Market influenced by Covid-19?
According to the South China Morning Post, it all began in China on November 17, 2019, when the first patient showed symptoms of Covid-19. In just a few months, governments worldwide started closing their national borders, canceling events, and banning public gatherings. With the number of confirmed global cases exceeding 55 million, it’s hard to imagine which part of our lives has not been affected by the global pandemic.
Despite the dramatic and tragic events, the Covid-19 pandemic did have a positive impact on the world. The pandemic questioned European conservatism, heavily relying on the traditional financial system, and pushed Europeans to use cashless payments and cryptocurrencies. According to some experts, Covid-19 even hastened the mainstream adoption of cryptocurrency globally by changing people’s idea of money.
Specifically, the Covid-19 pandemic propelled the safe haven narrative of cryptocurrencies. As central banks printed an estimated $15 trillion to ease Covid-19’s effects on the global economies, people started turning to cryptocurrencies as the next inflation hedge. Moreover, governments started initiating Covid-19 tracking programs, which raised serious concerns about privacy violations. Thus, people started adapting decentralized technologies as a solution to safeguarding privacy.
– How was the Cryptocurrency Market influenced by the war in Ukraine?
The Russia-Ukraine war initially hurt the global cryptocurrency market. In addition to the cryptocurrency market size sliding down, most top cryptocurrencies showed signs of a downward trend. However, crypto exchanges soon started to see a surge in demand from Ukraine and Russia as the war progressed. Shortly after Russia invaded Ukraine, digital currencies jumped in value. While Bitcoin led the rise, other prominent cryptocurrencies like Ethereum and Solana followed suit.
But why was such a volatile asset detached from the financial system suddenly surging in value? Many of the downsides of cryptocurrency suddenly became upsides. And the most obvious reason had to be the collapse of Russia and Ukraine’s currency.
When Russia’s currency, Ruble, collapsed during the war, the Russian people made long queues outside ATMs to withdraw as much cash as possible. As the currency was devaluing fast, they wanted to buy hard goods and stable currencies like the dollar, euro, and yen that could retain their value. But since the US and its partners cut off the Russian government’s access to overseas banks, those currencies were increasingly in short supply. This is where cryptocurrencies came into play. Being decentralized and peer-to-peer, cryptocurrencies enabled Russian citizens to be in control of their own funds.
Something similar happened in Ukraine. As Russian troops closed in on the Ukrainian capital, people decided to leave their homes, and many converted as much money as possible into cryptocurrencies. Another factor that drove the cryptocurrency market upward is the media attention that followed the Ukrainian government’s request for donations in cryptocurrency. People who believed in the Ukrainian cause raised over $54 million through cryptocurrency donations, thus funding the military and medical supplies. The activity highlighted that all things people considered downsides were actually upsides at a time like that.
– How was the Cryptocurrency Market influenced by the world economic crisis?
As the Federal Reserve raises its interest in combating high inflation, investors wonder how cryptocurrencies might fare in the world economic crisis. The performance of the cryptocurrency market is most comparable to how the stock market performs in these times, as investing in crypto is similar to investing in stocks. In tough times, people tend to hedge their bets and cut back on spending. Thus, investors often sell riskier and more volatile stocks or ones that aren’t performing well.
Furthermore, cryptocurrency is far more volatile than the stock market. While stocks consistently grow and shrink, the highs and lows of cryptocurrency are not for the weak-hearted. This means people will likely take their money out of crypto exchanges and put it into traditional bank accounts or safer investment options.
More and more people taking their money out of crypto has been detrimental to the entire industry. The overall market became worth less, and with less money floating around, the market sentiment has also decreased. Consequently, with fewer people owning cryptocurrencies, more coins are now available, thus making them less valuable. In addition, crypto exchanges and projects have started to go bankrupt, further fueling the bearish sentiments in the crypto market.
What are the main trends for the Cryptocurrency Market starting from 2015 till 2025?
Technological developments have led to new currency exchange methods, and cryptocurrency is one of them. Since the creation of Bitcoin in 2009, cryptocurrencies have undergone rapid growth and expanded to various use cases with tremendous growth prospects. Now, let us look at the most prominent cryptocurrency market trends likely to grow through 2025.
- Institutional Adaptation: Financial institutions and large corporations have long viewed the crypto space with skepticism. However, many institutions have recently started allocating significant capital to the crypto market. In addition, they are also making it easier for consumers to transact in cryptocurrencies.
- DeFi: The emergence of decentralized finance (or DeFi) applications drew significant attention to the crypto space. It basically involves bringing traditional financial transactions to the blockchain, enabled by smart contracts. Also, unlike traditional financial systems, there is no need for financial intermediaries in DeFi.
- NFTs: Non-fungible tokens (or NFTs) have been one of the most interesting developments in the crypto space. Simply put, these tokens represent the ownership of unique assets, both digital and physical. Most NFTs are created using smart contracts that describe the digital or physical product they represent. In 2021, the NFT market skyrocketed alongside cryptocurrency, with everyone jumping in on the trend, trying to make it big.
- DApps – Decentralized Applications (or DApps) are software applications that exist and run on a blockchain or a distributed peer-to-peer network. According to State Of The Dapps, a DApp monitoring website, there are currently over 4,000 DApps in the industry.
Over the last several years, cryptocurrency market trends have been almost entirely unpredictable. It’s not only because of the new innovations like NFTs but also due to general market volatility. However, one thing is sure: innovation in the crypto space will always continue. And, just like in the traditional market, crypto projects should continue developing and marketing their products during an economic downturn.
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