To say that 2022 was a bad year for Bitcoin and the broader crypto market would be a vast understatement. Coming off 2021’s high of $69,000, many of the cryptocurrencies have since retreated by 70% or more, contributed in part by the Fed’s quantitative tightening policies, resulting in the everything sell-off and a conservative stance by most companies anticipating a 2023 recession to play out.
Things seem bad. No, things ARE bad. But, it’s something we’ve all seen before. At least twice.
State of Bitcoin 2014
Bitcoin had its first halving November 28, 2012. Following the cut in mining rewards, Bitcoin went on an amazing run in 2013, running all the way up to over $1,000 at the time.
Then, in 2014, the Mt. Gox hack happened. In that calendar year, Bitcoin went from $732 on 1 Jan 2014 all the way to close out the year at $321 on 31 Dec 2014. That was a 56% drawdown in a calendar year, more if you took into account peak to trough.
It would spend the next 2 years in hibernation, until it claimed a new all time high in January 2017 following the 2nd bitcoin halving in Jul 9, 2016, and then go on a legendary run up to $19,377 in Nov 2017.
State of Bitcoin 2018
But, what goes up, must come down. And once again, when Bitcoin drops, it drops. After touching $19,000 in Nov 2017, by 1 Jan 2018, price had already dropped to $13,880. But by the time we were done with 2018, Bitcoin had dropped even more to settle at $3,693 at the end of December.
This represented a 73% drop, just in the calendar year alone, and not factoring in the peak of the 2017 run.
This time, it was the bursting of the ICO bubble, along with the Bitconnect scam.
State of Bitcoin 2022
Once again, following the 2018 crash, Bitcoin and the broader market went into hibernation over the next 2 years. But 2021 brought with it the NFT boom and the DEFI summer, frothing the entire market up to a lofty $3 Trillion market cap.
Bitcoin itself became a Trillion dollar asset class for a while, peaking at $69,000, prompting many price predictions ranging from $100,000 to $250,000.
Ape jpegs traded for hundreds of thousands of dollars, and Beeple’s NFT “The first 5000 Days” sold for a whopping $69M.
Again, these events were preceded by the 3rd Bitcoin halving, which occurred on May 11, 2020.
Bitcoin started the year at $46,230, and as of 27 December, we’re holding at around $16,850. This represents a 63% drop for the year.
This time is different?
So, this is the 3rd major crash that the crypto industry has seen since Bitcoin’s inception in 2009. So I’m fairly confident that we’ll see it bounce back again over the next 2 years. But beyond the ebb and flow, what’s different this time?
Well, I can name 3 major catalysts that has released the genie from the bottle, and in my opinion, will be impossible to put back. These 3 movements, or trends, has catapulted crypto from niche retail nascent technology to full-on involvement, or at least forces institutions to have a point of view on crypto. In other words, nobody can look away and pretend they don’t exist anymore.
- Public listed crypto companies: COINBASE is a crypto exchange. RIOT, a bitcoin mining company, and Galaxy Digital is a digital asset management company. They are all publicly listed, and trading on NASDAQ. This brings crypto to the forefront of Wall Street, and helps spread further awareness of the industry to everyone else.
- Institutional Involvement in Blockchain Technology: Over the course of the last bull cycle, many companies have gotten involved in crypto in several ways. MicroStrategy and Tesla have both bought bitcoin as part of their corporate treasury allocation. VISA and MasterCard are both involved in creating additional on-ramps into the crypto world. Facebook renamed their legal entity into Meta, to underscore the importance of their next phase of evolution into the metaverse space. Almost every major bank is looking into the digital asset custodial space. DBS bank already has a crypto exchange for their institutional clients.
- Bitcoin as legal tender: El Salvador, in 2021, became the world’s first country to recognise Bitcoin as legal tender. Yes, this means you can go to El Salvador and get a haircut or pay for McDonald’s with Bitcoin.
These are macro events that shifts the entire industry forward, that not even a bear market can reverse. With these foundational pillars in place today, I’m even more confident of the crypto space over the next decade.
Even the spectacular failure of LUNA and FTX has a silver lining, which is that regulation will come about faster and in a more comprehensive manner. This in turn provides guidance to institutions on their crypto strategy, paving the way for more involvement and greater regulatory framework clarity.
I would end this post with this: If you’re holding on to any crypto today, please, take it off any centralised exchanges, and store it on a cold wallet. “Not your keys, not your coin” is an age-old advice, and not without reason. I’m using ledger, and my buddy Kevin from TurtleInvestor just reviewed the Trezor One wallet.