Annual Report – Cryptocurrency Market in 2022

Fumbi’s research team has prepared the Annual Report from Cryptocurrency Market in 2022. You will find all important information from the areas of market news, on-chain data, decentralised finance or NFTs in one place.

The year 2022 was perhaps one of the most difficult years in the entire crypto history. It has been marked by many negative events and failures of individuals, institutions and protocols. Although we have already seen the collapse of large institutions in the world of crypto, the number of major institutions that have gone bankrupt this year is unprecedented. Even though negative news circulates the world much more frequently and quickly than positive ones, there has certainly been no shortage of development and adoption news.

Three Arrows Capital, BlockFi, Celsius and FTX were among the major players in the market that either failed to manage risk or because of irresponsible gambling with clients’ money. We cannot yet say for certain what was behind the events that caused this whole series of bankruptcies. The collapse of the Terra will surely go down not only in the history of cryptocurrencies but also in the history of finance. Never before in the history of cryptocurrencies has such a large project collapsed in such a bitter way within such a short period; moreover, with the support of such major players in the market. No doubt we will be able to watch documentaries about this saga sooner or later. 

On the other hand, there has been significant progress in the adoption and development of crypto projects, for example, the Lightning Network or the Ethereum network, which has undergone a transition to the new Proof-of-Stake consensus algorithm without users even noticing.

There are a number of projects in the DeFi world that are progressing at a meteoric pace and bringing interesting innovations. Uniswap has integrated NFTs, Polygon and others have introduced zero-knowledge proofs-based versions of the Ethereum virtual machine (EVM), and while TerraUSD went bankrupt, another fractional algorithmic stablecoin, Frax, has managed to keep its peg with the US dollar firmly in place.

Progress also took place outside of source codes. The Central African Republic was the next country to adopt bitcoin as its own. Bitcoin has also made its way into the retirement accounts of Americans, who can now save in it for the long term, and the European Union has finally published the final version of MiCA, which will govern cryptocurrency-related services in all member countries. The world of cryptocurrencies has indeed been full of news and interesting events in the past year. Our report brings you an overview of the key ones.

Read the full report – download it here.

The Year 2022 in Numbers

Market Capitalisation of the Crypto Market

Source: Coinmarketcap

The value of the entire cryptocurrency market was at $2.25 trillion in early 2022. Over the last twelve months, the market capitalisation fell by 64% to a year-end level of $795 billion. This year’s highest market capitalisation was reached on 3 January 2022, when the market capitalisation was $2.26 trillion.

Market Dominance

Source: Fumbi Research

The downtrend of Bitcoin’s dominance slowed considerably in 2022. Bitcoin’s dominance remained almost unchanged, dropping just 0.4 percentage points over the year from 40.5% to a year-end 40.1%. However, some alternative cryptocurrencies, such as Ethereum, Tether and BNB, have strengthened their position in the market.

Read the full report – download it here.

Bitcoin in 2022

Source: Coinmarketcap

Bitcoin opened 2022 at $46,300 and closed at $16,557. The value of Bitcoin has fallen by 64.23% compared to the beginning of 2022. The decline in the value of Bitcoin and other assets was mainly due to the unfavourable macroeconomic situation, high inflation and the war in Ukraine. The lowest value of Bitcoin this year was recorded in November during the FTX crisis when Bitcoin dropped to $15,500.

Monthly Returns of Bitcoin in 2022

Source: Fumbi Research

During this calendar year, Bitcoin had 8 months with a negative monthly return and 4 months with a positive return. The worst month for Bitcoin was June, when its price dropped by 37.28%.

Ethereum in 2022

Source: Coinmarketcap

Market number two, Ethereum, opened 2022 at $3,683. Ethereum’s valuation has fallen 67% during this year to its current value of $1198. At the same time, the price of Ethereum has fallen 75.5% as of the end of this calendar year from its peak reached in November 2021.

The Most Notable Events in 2022

Ethereum Migration to Proof-of-Stake

In mid-September, the second-most-popular cryptocurrency Ethereum underwent an important upgrade called The Merge. The main goal of this upgrade was Ethereum’s transition from the Proof-of-Work consensus algorithm to the new Proof-of-Stake model, eliminating the need for miners and the energy-intensive consensus.

Miners have been replaced by validators in the network who guarantee the validity of blocks with staked ETH coins rather than computational power. As a result, the overall energy consumption of the network dropped by up to 99.9%. However, this update did not bring any changes to Ethereum’s scalability, as an upgrade aimed at increasing throughput is scheduled for 2023.

A significant change within the upgrade was an adjustment to the issuance of new ETH coins. While under the old consensus, approximately 13,000 new ETH were put into circulation daily, after the upgrade and the switch to Proof-of-Stake, the daily issuance of ETH has been reduced to only 1,600 ETH. This has made Ethereum a much less inflationary asset that has the potential to reach deflationary levels under certain market conditions. This is made possible by the burn fees implemented as part of the EIP-1559 update that was adopted in early August.

Read the full report – download it here.

Decentralised Finance (DeFi) 

Total DeFi Users

Source: Cryptobeholder

The DeFi sector is one of the most common uses of cryptocurrencies. In 2022, more than 1.041 million unique addresses interacted with DeFi platforms. But, DeFi is experiencing a significant decline in interest in current market conditions. The amount of assets that are stored in this sector has decreased by over 77% in the last year. This development is obvious, given the bear market that the world economy is currently in. We can observe a similar trend in the number of active users of DeFi applications.

DeFi – Total Value Locked (TVL)

Source: mc.xyz

The total value locked in the DeFi sector at the beginning of the year was approximately $242 billion. As of the first week of December, the funds deposited in DeFi were less than $62 billion. The decline through 2022 is nearly 75%. As we have already mentioned, this decline is linked to the current market cycle known as a bear market, which is currently prevalent not only in the cryptocurrency market but also in more traditional markets such as the stock market.

You can read the most important metrics and data from the DeFi world at this link.

NFTs, GameFi and Metaverse

What happened to the NFT market in 2022?

Source: Cryptoslate

NFTs are still considered one of the most interesting ways to attract people to try interacting on the blockchain. Comparing 2022 to the previous year, total year-end sales were over $55.5 billion, up 175% from $20.2 billion in 2021. However, it should be added that most of the gains and record sales were made in the first quarter – since then, we’ve seen a continuous trend of declining sales.

December Bizarro: Trump Digital Trading Cards

Source: The New York Times

In early December, the crypto art world received an unexpected visit from Donald Trump, who announced his own Trump NFT collection on Truth Social, the social network he uses as an alternative to Twitter. Back in 2021, Trump was clearly not a fan of blockchain and cryptocurrencies in his statements, so his NFT collection on the Polygon network, which consisted of 45,000 NFTs at a starting price of $99 apiece, was probably not expected by anyone.

More from the NFTs, GameFi and Metaverse sectors, including detailed information on Donald Trump’s collection, can be found at this link.

Stablecoins

Source: Coingecko

The year 2022 has been a transformative one for stablecoin adoption. The stablecoins with the highest market capitalisation included USDT (nearly $66.3 billion) and USDC ($42.2 billion). In 2022, more traditional stablecoins such as DAI and USDT lost significant percentages of their market capitalisation. USDT has lost approximately 15%, while DAI has lost more than 42% of its market capitalisation since the beginning of this year. Demand for the FRAX stablecoin has declined similarly to DAI, by as much as 43%.

For more information, including on-chain data, the development of alternative smart-contract platforms, and Fumbi news, see our Annual Report – Cryptocurrency Market in 2022

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