Quarterly Overview of The Cryptocurrency Market – Q2/2022

The second quarter of this calendar year was marked by high volatility, not only in the cryptocurrency sector but also in other financial markets. Macroeconomic uncertainty combined with the geopolitical conflict in Ukraine continues to push commodity and energy prices to new highs, and rising inflation in countries around the world is creating wrinkles on the foreheads of central bankers.

This quarter’s most tragic event in the world of cryptocurrencies was the fall of blockchain platform Terra and algorithmic stablecoin UST. However, in recent months, the ever-increasing inflation theme has resonated worldwide. In the United States, inflation has reached 40-year highs, to which the Fed has responded by raising key interest rates. Countries on other continents are facing a similar situation, with inflation reaching double-digit levels in some cases.

On the other hand, a significant step toward mainstream adoption of cryptocurrencies was the adoption of Bitcoin as legal tender by yet another country. El Salvador was joined by the Central African Republic, which decided to switch to the Bitcoin standard in an effort to kick-start the country’s economic recovery and peace-building initiatives.

The huge outflow of bitcoins from exchanges, the ever-growing number of bitcoin owners, and the influx of capital from institutions are just some of the metrics based on which we can expect high growth of bitcoin’s value in the future.

Read the entire foreword by our CIO David Stancl in the full report.

In the full report for the second quarter, you will find more information about market events, which include:

• The collapse of the blockchain platform Terra
• Bitcoin became legal tender in the Central African Republic 
• An advance in the development of Ethereum 2.0 
• A cryptocurrency bill was introduced in the US 
• Several crypto institutions experienced financial problems 
• The bankruptcy of the hedge fund 3AC 
• Crypto exchange Coinbase laid off 18% of employees overnight
• Shopify integrates Strike Wallet
• Fidelity adds Bitcoin to 401(k) retirement plans
• Interest rates have doubled
• European Central Bank released a survey on cryptocurrencies

How Did Bitcoin Perform?

Bitcoin opened the second quarter of this calendar year with a valuation of $44,655. The first quarter was marked by high volatility and price correction. Bitcoin lost up to 56% of its value and closed the second quarter with a valuation of $19,366. Bitcoin reached its price peak this quarter on April 5, when it traded at $46,716.

Price Actions of Top 10 Altcoins

Among the top 10 altcoins (stablecoins excluded), Bitfinex’s exchange token LEO fared the best in the second quarter of this calendar year, with a loss of “only” -0.68%. All cryptocurrencies from the “TOP 10 altcoins” were in the red in the second quarter. The biggest loss among them was recorded by Avalanche, which recorded a loss of -83% from April 1 to June 30. We have excluded the cryptocurrency Terra which lost up to 99.9% of its value in an unfortunate event known as “Terragedon.”

Bitcoin – Address Count

The addresses count metric on the bitcoin blockchain tracks the total of unique addresses that had a positive balance on their address. In practice, this means that including these addresses in the metric is conditional on there being a non-zero positive balance of native network units at the address, in this case, a non-zero balance of bitcoins. During the second quarter of 2022, the number of such addresses grew by 2.41%, from an initial 41,359,489 to 42,354,488 addresses.

You will find information about addresses with a balance greater than 0.01 BTC, 1-year active supply, and hashrate in the full report. 

Fear & Greed Index 

In the second quarter, the Fear & Greed Index moved from the green band signaling “greed” to the red band signaling “fear” among investors. The fall of this index into the red band is directly related to the sell-off in the cryptocurrency market, during which investor sentiment changed significantly, and many entities began to sell their assets in the face of declines and an unfavorable economic situation. Historically, low index values have proven to be an excellent entry point for investors.

Ethereum – Address Count

The total number of addresses on the Ethereum network continues to grow rapidly. During the first three months of the new calendar year, the number of addresses on the Ethereum network grew by 6.57% to 83,603,362 addresses. The significant growth in addresses signals the continued interest of users to interact with DeFi applications and with NFTs. In addition, the long-awaited ETH 2.0 upgrade is garnering attention from a number of investors who are accumulating Ethereum as an investment asset for the future.

You will find information about Ethereum’s average transaction fees and hashrate in the full report. 

Total Value Locked in DeFi  

The Total Value Locked metric, known as TVL, measures the total cumulative value of assets deposited in DeFi apps across selected smart contract platforms during a selected time period. This metric also includes the values of assets derived from the various activities that can be carried out through DeFi – for example, staking, liquidity provision, lending, or any other activity in which the user interacts with smart contracts.

A project’s TVL does not only change when users deposit or withdraw their assets. The TVL is constantly adjusted dynamically in accordance with the dollar value of all such assets in the cryptocurrency market. Some investors compare a project’s TVL to its market capitalization to determine whether a project’s token is overvalued or undervalued.

The second quarter of this calendar year, like other areas in the cryptocurrency sector, was marked by a downturn. The decline in TVL correlated with price declines in BTC and other cryptocurrencies. During the downturns, users withdrew their liquidity from decentralized protocols, which they exchanged for stablecoins or cash to avoid the downturns’ negative impact on their portfolios. The crash of blockchain platform Terra, which hosted a large number of decentralized projects, also negatively impacted overall TVL. According to DefiLlama, at the beginning of the quarter, the cumulative TVL on all blockchains was almost 228 billion, while during the quarter, it fell by -67% to a final value of 73.3 billion.

You will find more on other events, development of DeFi platforms, NFT, and metaverse in the quarterly overview.

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