2022: A Year in Review

The global economy takes a tumble

The tail-end of 2021 saw an encouraging global economic recovery after the detrimental impact of the Covid-19 pandemic shook the world in years prior. Improved worldwide vaccine access and low-interest rates worked to stimulate economic growth. Finally, some respite in 2022 - or so we thought. 

There were signs of an impending inflation crisis in December 2021 as the US Consumer Price Index (all items index) rose by 7.0% year-on-year representing the biggest 12-month increase since the period ending in June 1982. However, the major flashpoint occurred in February 2022, as Vladimir Putin shocked the world by instigating the Russian invasion of Ukraine. Following this illegal action, the international community announced various trade sanctions on Russia causing a staggering uptick in oil and commodities prices, particularly in Europe because of its dependence on the Russian energy supply. This combination of scarcity and increased demand for oil, natural gas, and wheat has led to alarming inflation rates in the double digits for many G20 nations including Germany (10%), United Kingdom (10.7%), Italy (11.8%),  Turkey (84.3%), and Argentina (92.4%). 

Undoubtedly, high inflation, the cost-of-living crisis, the surge in energy and food prices, and various political missteps such as the UK’s emergency mini-budget in September 2022, have all taken a huge toll on investor confidence and market sentiment. These issues have also had a tremendous impact on the crypto industry. 

Security and regulation in the crypto industry

We’ll just come out and say it: 2022 was a turbulent year for crypto. The first half of the year saw a steep decline in the market, which didn’t do any favours for most cryptocurrencies nor for the popular crypto exchanges.

Coinbase plunge May 2022

Back in May, when Coinbase released its lower-than-expected Q1 revenues, they also included a new risk disclosure in the report, which set Coinbase customers into a panic about what would happen to their funds in the event of a bankruptcy. Though Brian Armstrong, CEO of Coinbase, assured customers via Twitter that their funds were “safe”, the situation raised the question of who actually owns the crypto that is purchased through crypto exchanges. Uncertainty and scepticism caused Coinbase shares and the value of its exchange currency to plunge drastically, performing even much lower than the rest of the market.  

FTX crash November 2022

Then in November, a series of Tweets between Binance’s CEO Changpeng Zhao, and Sam Bankman-Fried, the now former crypto wunderkind and now also former CEO of FTX, revealed that Zhao sold all of his FTT holdings after reports of shady business practices at FTX and sister company Alameda Research. The situation immediately imploded and a run on deposits hurled FTX into a liquidity crisis. This snowballed into an investigation that revealed that FTX was misappropriating funds to prop up Alameda. FTX promptly filed for bankruptcy, leaving the company $3 billion in debt to its creditors, FTX’s native token FTT severely lost its value, SBF’s fortune (and reputation) obliterated, and some customers still don’t have their money back - $8 billion, to be exact. On December 13, Sam Bankman-Fried was arrested in the Bahamas on fraud charges.

We did mention it was a wild year, right?

Unfortunately, this had consequences for the wider crypto industry. Trust in the industry wavered. But the silver lining is that it shed a much needed spotlight on the topic of crypto regulation. 

Thoughts from our CEO Eric Demuth on crypto regulation

“There are lessons we need to learn from the FTX crash. One of the biggest is that regulation without enforcement is pointless. Currently too many companies are operating in Europe without even bothering to apply for local licences or regulations, because they know they don’t have to. There is a reason that FTX had a “FTX US” and not an “FTX Europe”: Companies are scared of the consequences of breaching regulations in the US.

We also need to cut fiat access to bad actors. PSPs in Europe should not be allowed to grant access to Europe’s fiat systems without the same oversight applying to the end user.

The upcoming MiCA framework will be the next big step in the right direction, as it will streamline regulation and oversight in the EU and will hopefully mitigate some of the chaos. I believe strongly that these measures will only improve our industry and will help it reach new heights in the coming years.”

Safety, security and transparency at Bitpanda

We at Bitpanda believe in being a regulated retail investment platform and back up our beliefs by choosing to acquire all relevant crypto registrations and licences. Bitpanda diligently follows European laws and regulations. We operate our businesses based on various VASP registrations, as well as MiFID II, E-Money and PSD II licences amongst all our core markets. 

Regulation is the next big step for crypto - and a necessary one at that. Read more about Bitpanda’s commitment to security and regulation.

The ups and downs of the crypto market

2022 began with Bitcoin and most major altcoins in the red and with the Crypto Fear & Greed index hovering in the “extreme fear” area. In the first two weeks alone, the total crypto market cap fell to around €1.75 trillion. Things started to pick up in the beginning of spring with the general sentiment recovering a little. 

Crypto becomes popular with major institutions

Though 2022 has been a less than stellar year for cryptocurrency, it didn’t begin too badly for the industry: Crypto’s reputation and mainstream exposure grew as major banks and institutions became seriously interested in its potential. Back in February, State Street Bank, which is the second oldest continually operating bank in the United States, led the charge by announcing plans to launch a crypto asset custody service for Bitcoin and other digital assets. By October 2022, Bank of New York Mellon, the world's largest custodian bank, rolled out a new digital asset custody platform and became the first major US banking institution to safeguard digital assets alongside traditional investments on the same platform.

KPMG in Canada completed an allocation of crypto assets to its corporate treasury, which was the firm's first direct investment in crypto assets and a landmark moment for crypto credibility. Benjie Thomas, Canadian Managing Partner, Advisory Services, KPMG commented:  

“Cryptoassets are a maturing asset class […] This investment reflects our belief that institutional adoption of cryptoassets and blockchain technology will continue to grow and become a regular part of the asset mix.”

The worst week in crypto history

Things were looking fine until May when what can only be described as one of the worst weeks in crypto history happened: the crypto market plunged together with the global financial markets in a massive sell-off that resulted in double-digit drops for every major coin in the market. Bitcoin fell by almost 23% in seven days while some of the top 10 major altcoins saw losses of over 50%. This coincided with the crash of the Terra ecosystem, its token LUNA and the stablecoin TerraUSD (UST) TerraUSD, the world’s third-largest stablecoin, collapsed as it decoupled from the U.S. dollar, plunging below $0.30, while LUNA fell by over 95%. Things went from bad to worse when the Crypto Fear & Greed Index plummeted to 7 (out of 100), which it hadn’t done since August 2019. 

Not until late July did the market embark on its recovery. In August, Bitcoin and major altcoins surged after a report by the US Consumer Price Index showed U.S. inflation was 8.5% year-on-year in July. Things continued to go alternately slightly up and then slightly down again for the months closing out the year.

What else happened: the Ethereum Merge September 2022

One of the most significant events in the crypto industry happened this year: Of course we’re talking about the Ethereum Merge from Proof of Work to Proof of Stake that happened, finally, in September this year. It was the biggest upgrade in Ethereum’s history and all happened rather smoothly, and ETH’s performance gained in that timeframe while that of Bitcoin dropped in response.

Bumpy ride, but a bright future for crypto

It’s been a tough year. But crypto has been here before, and it tends to bounce back. It’s a dynamic industry that is evolving rapidly, with new technological advancements and innovative new projects released regularly and a strong, enthusiastic community that is continuing to grow every day. Despite the setbacks of 2022, there’s plenty to be excited about in the years to come. As you’ll see below, NFTs, crypto, DeFi and Web3 projects are finding their way into the mainstream. We very much believe in the industry and see a bright future ahead.

Broader adoption of NFTs, crypto, and DeFi

On a lighter note, it was definitely the year that solidified non-fungible tokens (NFT) as one of the most popular, creative and accessible digital asset types – when Paris Hilton discusses the Bored Ape Yacht Club on Jimmy Fallon, then you know NFTs are officially part of the mainstream. 2022 saw NFT collections popping up left and right and expanding to reach new audiences. From Cryptopunks to Doodles to Cool Cats to Pudgy Penguins, NFTs have definitely become the new must-have, especially as a status symbol that you can show off in your Twitter profile picture.

2022 was also the year that crypto moved further into the consciousness of the “average person”, thanks especially to a growing interest in coins and tokens that aren’t either Bitcoin or Ethereum. LINK, ADA and SOL are just a few of the comparatively smaller cryptos that have been rising the ranks this year.

Collaborations with well-known brands and major sports teams launching their own fan tokens have also played their part in making crypto a “normal” everyday thing. Particularly the growing interest in the metaverse has made decentralised platforms and their native currencies a space to watch and get involved in in the years to come. Discover how major brands like Meta, Microsoft and a whole host of luxury fashion brands are already winning the metaverse.

Other asset classes picked up steam

2022 had it all: crippling energy crises brought on by geopolitical conflicts, massive inflation, cryptocurrency crashes. But as some aspects of the market slowed down, others picked up steam. 

The summer of commodities*

One notable asset class that performed exceptionally well this year is commodities*. Although commodities* were trending heavily over the summer and autumn due to rising energy prices, commodities* are actually considered to be evergreen asset classes that can round out and fortify any investment portfolio. Learn more about why commodities* are a popular investment. 

Stocks* and ETFs*

Like commodities*, stocks* and ETFs* are asset classes that can help diversify your investment portfolio - which, as we all know now, is one of the golden rules of investing. If we can toot our own horn here, we actually added a thousand more stocks* and ETFs* to the Bitpanda platform this year, doubling our offering and giving our users even more chances to invest in what they believe in. On top of that, we also added 17 new ESG-compliant ETFs*. Learn more about Bitpanda Stocks.

Precious metals

During times of inflation, economic hardship, and geopolitical strife, precious metals have offered a life raft for floundering investors. Gold has long been considered a sound investment in times of turbulence, with modern investors also adding silver, platinum, and palladium to their portfolios to hedge against inflation. Learn more about fortifying your portfolio with precious metals. 

See you in 2023!

As we’ve learned, what will happen next year is anyone’s guess, but rest assured  that Bitpanda has lots of amazing things in store for you. End the year with the resolution to invest in your future and let Bitpanda help you get started: Simply register with Bitpanda then take your pick from a range of cryptocurrencies, metals, stocks* and ETFs*. Happy holidays and have a bright start to the new year!

Disclaimer

This article does not constitute investment advice, nor is it an offer or invitation to purchase any digital assets.

*Commodities are the underlying Exchange Traded Commodities of the contracts offered as Bitpanda Commodities and are brought to you by Bitpanda Financial Services GmbH. More information about the product and the PRIIPs KIDs are available at bitpanda.com. Investing carries risks up to a total loss of the invested capital. Make sure to conduct your own research before making any investment.

Risks involved. * Index Certificates (e.g for commodities), Stocks and ETFs are underlying assets of the contracts offered as Bitpanda Stocks, brought to you by Bitpanda Financial Services. More information at bitpanda.com. This article does not constitute investment advice, nor is it an offer or invitation to purchase any digital assets.

For more information about the Bitpanda Crypto Indices, including a detailed description of the product, the issuer and the risks, please download, read and analyse the prospectus which is available here in English and and here in German (audited version). Make sure that you understand all the relevant aspects of the product and have read the prospectus before you invest in the Bitpanda Crypto Index.

This article is for general purposes of information only and no representation or warranty, either expressed or implied, is made as to, and no reliance should be placed on, the fairness, accuracy, completeness or correctness of this article or opinions contained herein.

Investing carries risks. Make sure to conduct your own research before making any investment.