The crypto world has been a roller coaster ride for investors in recent years. After a remarkable run in 2021, where many coins reached all-time highs, the crypto market experienced a significant dip in 2022, leaving many investors wondering: will crypto recover again?
This article explores the history of crypto market crashes, how they compare to the current state, and what the future might hold. Let’s dive in.
The crypto crash of 2022
The world of cryptocurrency went downhill in 2022, leaving many investors reeling and questioning the future of the market. The crash was characterized by a steep drop in prices of many cryptocurrencies, including Bitcoin, which lost nearly 80% of its value throughout the whole year.
Bitcoin weekly chart, source: tradingview.com
Some cryptocurrencies lost 90% or even 99% of their value. The prices eventually bottomed out at the end of 2022, with Bitcoin trading at around $15,500. However, the recovery in the following months was swift, with Bitcoin jumping nearly 40% in January alone. Many investors are cheering, thinking the bear market is over. But is it really?
2022 crypto crash vs other crashes
Investors need to remember to differentiate the whole crypto market cap from Bitcoin’s market. These are different numbers. The 2022 crypto crash was not the first time that the market had experienced a significant downturn. Last year wiped out around $2 trillion from the crypto market cap.
Related article: What should happen for Bitcoin to reach $10 million per coin?
In 2018, the market lost more than $650 billion in value, with Bitcoin losing over 80% of its value. Similarly, in 2014, the market lost more than $13 billion in value, with Bitcoin losing nearly 90%. There’s a noteworthy pattern, where Bitcoin crashes with the whole crypto market every four years. The similarities between these crashes are clearly visible.
Total crypto market cap chart, source: coinmarketcap.com
In all cases, the market experienced a significant downturn in a relatively short period of time, causing panic among investors. However, the recoveries were similar in each case. Some cryptocurrencies have never recovered from drastic market crashes, but Bitcoin always recovered after dropping around 80% in a downtrend that lasted approximately one year.
The recovery of the crypto market
The number of people interested in crypto has been rising ever since it was created. For instance, there have been approximately 1 million active Bitcoin wallets for the past few years, which indicates a strong interest in Bitcoin. Although this number is not higher than in 2017’s peak of almost 1.3 million addresses, this number is likely to continue to rise over time. That indicates the crypto market could recover sooner or later.
Bitcoin active addresses vs Bitcoin price, source: glassnode.com
Another reason for the recovery of the crypto market is the increased adoption of cryptocurrencies. Many companies are now accepting cryptocurrencies as a legitimate form of payment, which has increased demand and driven up prices. Even the largest asset managers started offering Bitcoin trading to their clients.
Read more: Stablecoins vs CBDCs – what’s the difference?
Additionally, the emergence of numerous sectors, such as decentralized finance (DeFi), GameFi, Layer 1 or Layer 2 protocols, NFTs, and others. That has created new opportunities for investors, which fuels the recovery as well as the next bull run every time. If the crypto market were to recover again in 2023 or 2024, it will be probably also fueled by new emerging sectors.
When will crypto recover?
While the crypto market has seen a swift recovery in early 2023, there are still concerns about the future of the market. One of the main concerns is the lack of regulation. Cryptocurrencies are still largely unregulated, which leaves investors vulnerable to fraud and market manipulation. As the market grows, regulators are stepping in to ensure the safety of investors.
Another concern is the environmental impact of cryptocurrencies. The mining of cryptocurrencies consumes a significant amount of energy, and many have criticized the industry for its carbon footprint. However, there are several cases of Bitcoin mining that use sustainable energy as well. As the world becomes more focused on sustainability, cryptocurrencies will face challenges in the future, like they always did.
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Despite these concerns, the future of the crypto market looks bright because of the ongoing Digital Revolution. As more institutions accept cryptocurrencies as a legitimate form of payment, demand will continue to increase, driving prices higher. The increased interest in crypto staking, NFT creation, stablecoins usage, and more are the driving force behind the market expansion.
Also read: What is crypto staking?
The last two bear markets in 2018 and 2014 both took approximately a year, with the 2022 bear market also lasting a little more than a year. The price of Bitcoin also similarly crashed by around 80%, with many people calling Bitcoin dead like they always did when the market was bottoming out. It even got so bad that Bitcoin mining became totally unprofitable, which is historically a great sign to buy for the long term.
In 2017, Bitcoin jumped by around 1,500% above its all-time high (ATH) level from 2014. In 2021, Bitcoin only rose 244% above its ATH from 2017. Each bull run is smaller than the one before, and it’s almost impossible to be able to predict the peak. However, each bull run took Bitcoin to a new ATH, so Bitcoin’s price could possibly increase to at least $100,000 in the next bull run, which is estimated for 2024/2025.
So, will the crypto market recover? It is very likely, yes. While the 2022 crypto crash was significant, the recovery was pretty fast. While there are concerns about the lack of regulation and environmental impact, the resilience of the market along with the increased adoption of cryptocurrencies suggest that the market will continue to grow over time. But it will take years. Patience is a must.
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