Remember when cryptocurrency used to be the talk of the town? You couldn’t go anywhere during the early months of the COVID-19 pandemic, or even as recently as the first half of 2022, without hearing your friends talk about how much they’d won (or lost) in crypto, how they wish they had gotten into the trend earlier, and how NFTs were the next big thing. But things are much different this year.
As proof of that, let’s look at one of the best illustrations of what’s trending in Western society: the Super Bowl ads. In 2022, crypto companies spent a combined $39 million buying Super Bowl spots. The following year, there was not a single crypto ad to be seen.
Why is that? The crypto industry has fallen on hard times in the months since last year’s Super Bowl. Celsius Network, a cryptocurrency lending company, announced, “Due to extreme market conditions, today we are announcing that Celsius is pausing all withdrawals, Swap, and transfers between accounts” before shutting down mid-year. Later in November, FTX, one of the largest cryptocurrency exchange platforms, declared bankruptcy.
Since these two institutions went dark, the currencies themselves 22,000 in existence todayđtook an enormous hit.
After hitting an all-time peak value of around $69,000 per unit on November 10, 2021, Bitcoin (BTC), the most well-known cryptocurrency, has since erased roughly 67% of its value, sitting at about $24,150/unit at the time of this writing.
All other major cryptocurrencies also dropped in valuation. Between December 2021 and December 2022, Ether’s (ETH) value declined by 65.30%, Cardano (ADA) by 75.26%, Binance Coin (BNB) by 48.41%, XRP by 51.46%, Dogecoin (DOGE) by 52.08%, ChainLink (LINK/USD) by 62.69%, Litecoin (LTC) by 47.66%, and Bitcoin Cash (BCH) by 74.90%.
Some of them have since rebounded a bit, but overall, as of now, they are down from their value in late 2021.
The story, however, does not end there. Other supposedly more secure forms of crypto, like Stablecoins, also took a big hit.
Stablecoins are a type of digital currency backed by another form of currency like the US dollar or a commodity like gold. They are designed to be less volatile than other forms of cryptocurrency. The most notable hit was the collapse of the Luna token and its associated TerraUSD stablecoin. Initially traded at a parity of $1 for 1 TerraUSD (hence the name), it is worth a mere $0.022 at the time of this writing.
So, what happened? We can point out three main factors:
#1 Financial Rollercoaster
“What goes up must surely come down” is a well-used expression in the financial world. That illustrates what happened last year, with top crypto assets experiencing massive price plummets. This was further exacerbated by people shorting the market (or selling), taking crypto prices to lower lows.
#2 Crypto Regulations
Cryptocurrency is decentralized, with no central authority governing its use. However, with the current exchange hacks and pump-and-dump schemes, government officials are calling for crypto regulations. As a result, many investors are pulling their funds out of the crypto space to avoid future trading restrictions.
#3 The shutdown of prominent crypto projects
Many crypto projects seemed promising in their early stages and drew investors to their platforms. However, a number of them failed to live up to the hype when founders started siphoning investors’ money into their pockets. This resulted in the spread of fear, uncertainty, and doubt in the crypto community. With that, many crypto users dumped their crypto coins in the market.
Is it safe to invest in crypto?
Just as volatility can be both an advantage and disadvantage for investors, the decentralized nature of crypto can bring risks. If something is decentralized, it is unregulated. Having no regulation makes an asset class riskier to invest in, as market users may seek to exploit the lack of oversight.
That is not the case when investing in stocks and bondsâmarkets subject to considerable regulation. Such regulations make these markets a safer place to grow wealth while allowing investors to be confident they won’t lose their money in a scam. While cryptocurrencies are legitimate, the lack of regulation does carry uncertainty that traditional assets don’t.
Finance guru and billionaire Warren Buffet told Yahoo! Finance that crypto “does not hold any value at all,” adding that he considers it an unproductive asset. Buffett has a well-known preference for stocks of corporations whose valueâand cash flowâcome from producing goods. But that’s not what crypto does, according to Buffet.
“They don’t reproduce, they can’t mail you a check, they can’t do anything, and what you hope is that somebody else comes along and pays you more money for them later on, but then that person’s got the problem,” continued Buffet.
Though Bitcoin is intended to provide real value as a payment system, its use is still pretty limited. As Buffett sees it, Bitcoin’s value comes from the optimistic belief that someone else will be willing to pay more for it in the future than you’re paying today. Surely, that optimism seems to be fading away.
So, are they dying?
In a word, no. Sure, they are not as ubiquitous as they once were, nor do they instill the same trust they once did. But by all accounts, a single Bitcoin is still worth over $20,000. If you had bought $1 worth of Bitcoin at its original price in July 2010 at $0.0008, it would be sitting at a whopping $30,187,500 at the time of this writing. Not bad at all.
Another area to touch on regarding the current crypto and NFT climate is the advent of Web3.0, where we will see the technology adopting other uses. Without a doubt, Blockchain development âonce an obscure term known only to tech enthusiasts and developersâhas become part of our common lexicon, and as we understand it more, different possibilities for how to use it will emerge.
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