Contributor, Benzinga
December 27, 2022

Bitcoin, alongside the entire cryptocurrency industry, has been presumed dead by the media more than 450 times in its 14-year history – often referred to as “the greatest scam,” “a Ponzi scheme” and “an implausible currency.” However, time and again, the crypto sector proved critics wrong – putting in new all-time highs (ATHs) and fostering greater levels of adoption and development after market downturns. While investor sentiment may fluctuate significantly, the value proposition and adoption of cryptocurrency technology continue to grow exponentially. 

t’s true that 2022 has been an absolute bloodbath for the cryptocurrency industry. The crypto world seems to be caving in, and the only people who seem to remain are early adopters and the extremely convicted.

In light of the FTX scandal, Terra Luna collapse and overall gloomy macroeconomic economy, many individuals are yet again questioning whether this is the end of crypto. The following discussion will explain why crypto prices have fallen, and why the crypto narrative is likely far from over.

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Why People Think the End of Crypto is Here

The cryptocurrency market is currently in one of the deepest periods of realized losses ever – investor pessimism is at unprecedented levels, and Bitcoin broke below its prior cycle high for the first time in its history. As a result, many investors have lost interest, while others have exited the cryptocurrency market entirely. 

The downward trajectory of the crypto space can be attributed to five core factors.

Global Macroeconomics

The murky economic backdrop of the global economy is the primary reason why crypto has declined in 2022. High inflation and tighter monetary policy have reduced consumer purchasing power. With little savings in hand, many investors want to reduce their exposure to risk-on assets such as cryptocurrency and park their cash in less-volatile markets. 

The limited flow of funds to the crypto market is further exacerbated by threats of global recession and the energy crisis caused by the Russia-Ukraine war.

Hacks and Security Breaches

The cryptocurrency industry has also been home to a multitude of scams and hacks in 2022. The majority of the hackers focused on cross-chain bridges and decentralized applications (dApps). These third-party interfaces hold a lot of liquidity, making them an attractive target for hackers. 

Because of a lack of regulation, few legal barriers to entry exist for new and upcoming protocols, nor are there best practice guidelines for such protocols to follow. Unsuspecting users can fall victim to the application vulnerabilities that occur on insecure blockchains. 

  • Ronin Network ($625 million): The largest crypto hack of 2022 occurred in March, when a hacker was able to steal 173,600 Ether (ETH) and 25.5 million USDC – with a combined cost of $625 million at the time – from the Ronin Network, a project that supported the Axie Infinity blockchain gaming platform.
  • Wormhole Bridge ($325 million): The Wormhole token bridge lost around 120,000 Wrapped Ether (WETH) tokens with a value of roughly $325 million at the time. The hacker was able to bypass the cross-chain bridge’s verification. 

The Terra Luna Collapse

In early 2022, LUNA, the native cryptocurrency of the Terra ecosystem and a previously top 10 cryptocurrency by market capitalization, lost virtually all its value in the span of a week. The collapse of the Terra network cost investors over $60 billion. 

In the aftermath of the Terra ecosystem collapse, many developers, communities, investors and families were devastated — some individuals lost their life savings and rumors have circulated that as many as eight traders took their own lives. The situation surrounding UST and LUNA reinforced the risk of algorithmic stablecoins and the importance of diversification in the cryptocurrency industry. 

The FTX Bankruptcy

In late 2022, FTX, a previously top 5 exchange by trading volume, filed for bankruptcy. The exchange operators allegedly overleveraged their operations and mismanaged user funds in the process. FTX owes over $3 billion worth of assets to over 1 million different users.

FTX was heralded as the Goldman Sachs of crypto, and CEO Sam Bankman-Fried was considered by some to be the next Warren Buffet. However, as time has passed and more information has come to light, the story surrounding FTX has become far more complicated – and potentially criminal.

In the aftermath of the FTX bankruptcy, many investors question the legitimacy and trust of centralized exchanges, offering another harsh reminder of the truth of “not your keys, not your crypto.” 

Looming Threats of Regulation

A lack of regulatory framework results in a high degree of uncertainty like price manipulation and volatility and makes financial institutions reluctant to participate. 

Crypto regulations are disorganized, complex and haphazard. Tax treatment is a core area of concern, and many investors are scared of investing because they don’t have a clear understanding of their tax obligations. 

Cryptocurrencies That Will Survive the Bear Market

While the overall market has recovered every time crypto has crashed, only a small fraction of available projects survive. Old projects lose demand and phase out as new projects enter the market. 

Historically, two cryptocurrencies have stood the test of time as market leaders – Bitcoin and Ethereum. Although their long-term viability is not guaranteed, these currencies have the best track records and the most solid value propositions. 

Bitcoin

Compared to other cryptocurrencies, Bitcoin commands the largest market capitalization and has historically guided the direction of the rest of the market. From an investment standpoint, the closest thing that Bitcoin can be compared to is digital gold. Bitcoin can be considered a speculative super commodity with a value proposition based on it being a perfectly scarce, portable, immutable and divisible savings technology. 

Ethereum

Ethereum (ETH) is the most well-known altcoin in the cryptocurrency sector and the second-largest cryptocurrency by market capitalization. The main idea behind Ethereum is that developers can create and launch dApps that run across a decentralized network instead of a centralized server. 

Where to Buy Crypto

Major cryptocurrencies such as BTC can be traded on exchanges such as eToro, Gemini, Uphold and Crypto.com. Many platforms allow you to purchase Bitcoin using your credit card, through swapping features or through different trading pairs such as BTC/USDT. 

How to Store Crypto

Hardware wallets and software wallets can be used to store cryptocurrencies such as Bitcoin. Hardware wallets are regarded as the most secure way to store cryptocurrency. With a hardware wallet, the only person who can access your crypto is you because it keeps your private keys offline. 

Software wallets enable crypto holders to securely store their digital currencies and tokens in one place. Users can buy, trade, lend and earn cryptocurrency using these types of wallets. 

Best Hardware Wallet: Ledger

Ledger claims to provide the highest levels of protection for crypto assets, making it a great choice for a hardware wallet. In addition to Bitcoin, Ledger hardware wallets support more than 1,800 alternative cryptocurrencies including Ethereum (ETH), Dogecoin (DOGE) and Chainlink (LINK).

Best Software Wallet: ZenGo 

One of Web3's most secure mobile cryptocurrency wallets is ZenGo, which is far more secure than conventional crypto wallets because it does not require a private key thanks to MPC technology. Users can securely purchase, sell, send and receive Bitcoin and numerous other altcoins using ZenGo.

So, Is This the End of Crypto?

Even though the outlook for the cryptocurrency market and larger financial markets in the short to medium term seems bleak, the long-term outlook for cryptocurrencies is still positive and encouraging.

The majority of negative catalysts responsible for the crypto market meltdown in 2021 and 2022 were not related to underlying technology but rather to outside causes like tight monetary policy or corrupt centralized corporations. There is no reason cryptocurrencies cannot recover as they did in the past if development continues to flourish and clearer regulation is developed in the near future.

Disclosure: ²Sum of median estimated savings and rewards earned, per user in 2021 across multiple Coinbase programs (excluding sweepstakes). This amount includes fee waivers from Coinbase One (excluding the subscription cost), rewards from Coinbase Card, and staking rewards. ³Crypto rewards is an optional Coinbase offer. Upon purchase of USDC, you will be automatically opted in to rewards. If you’d like to opt out or learn more about rewards, you can click here. The rewards rate is subject to change and can vary by region. Customers will be able to see the latest applicable rates directly within their accounts
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