‘From Boom to Bust’: Could we see a cryptocurrency comeback in 2023?

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2022 saw a sharp decline in the reputation of cryptocurrency off the back of the collapse of the FTX cryptocurrency exchange. Initially launched in 2019 by Sam Bankman-Fried, the trading platform gained enormous momentum, rising to a $32bn (approx. £26.6bn) valuation in January of 2022.

The tumultuous and, quite frankly, baffling, tale of its collapse has caused a disastrous domino effect on the rest of the industry. Now, cryptocurrency has hit an all-time low in many respects, with numerous studies now looking into the adverse effects of this often volatile investment. Read on to find out more…

Firstly, researchers at CoinJournal have discovered from on-chain data that there are 73 per cent fewer Bitcoin millionaires after 2022, as the coin continues to plunge in the wake of the FXT scandal and tough economic conditions.

Key takeaways from the research included:

Dan Ashmore, crypto analyst at CoinJournal commented: “In November 2021 the cryptocurrency market was valued at $3tn, when Bitcoin traded at its all-time high of close to $69k.

“Since then, we have seen top 10 cryptocurrencies collapse, one of the top exchanges revealed to be a house of cards and numerous other bankruptcies and scandals. The loss has been greater than $2tn, with Bitcoin shedding three-quarters of its value as at the time of writing, trading at $16,800 per coin.

“Looking at on-chain data, Bitcoin millionaires have dropped like flies. Entering 2022, there were 90,000 addresses containing over a million dollars worth of Bitcoin. Today, it is 24,000; that amounts to a fall of 73 per cent.

“The on-chain data sums up what is glaringly obvious from looking at a Bitcoin price chart – that the party is over and investors are no longer dreaming of retirement off their Bitcoin holdings, in the near future at least!

“Nearly three-quarters of Bitcoin millionaires losing that status is perhaps the best piece of data of all to summarise how ugly 2022 was for investors. Bitcoin’s returns before 2022 were astonishing.

“As a result, the bulk of the supply was in profit, with only 25 per cent of the supply loss-making entering the year. By year-end, this had doubled to over 50 per cent, another stunning statistic when considering that Bitcoin was the best-performing asset class in the world over the prior decade.”

Hacks and fraud

Further compounding the issue, crypto hacks and fraud reached a record high in 2022, with incidents up 27.66 per cent from 2021. New research also by CoinJournal looked at available data around major breaches and fraud since 2012 to reveal the countries experiencing fraud the most and how crypto fraud is increasing YoY.

2022 was the worst year for crypto fraud and breaches, with 120 different incidents occurring during the year. This was 26 more than the previous year, which equates to an increase of almost 28 per cent.

Environmental impact

Finally, we have research by Forex Suggest which has looked at how much the environmental impact of the top coins have increased or decreased since 2021 to reveal how crypto mining and trading impacted the environment in 2022.

Bitcoin ranks first on our list. With a projected 86.3 million tons of CO2 emissions for 2022, a huge 431.6 million trees would need to be planted in order for Bitcoin’s annual CO2 emissions to be removed from the atmosphere.

Litecoin finds itself second on the list. The cryptocurrency is now estimated to produce 525.4 thousand tons of CO2 emissions per year, meaning that 2.6 million trees would need to be planted in order to counteract the pollution.

Bitcoin Cash takes the third spot on the list. Despite a hugely significant drop since 2021, the cryptocurrency is still producing 141.4 thousand tons of CO2 emissions per year. This would require 707.3 thousand trees to be planted in order to offset the pollution.

The data also revealed:

Ultimately, this has resulted in a slump for key cryptocurrencies the likes of which the medium has not previously experienced. And while the market limps on, it remains to be seen whether or not cryptocurrency will ever again reach the dizzying heights we’ve seen in recent years, or whether it will finally peter out altogether, leaving investors high and dry.

By Matthew Neville, Senior Correspondent, Bdaily

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