The world of cryptocurrency has encountered numerous peaks and troughs in its fortunes, ever since the first digital currency, Bitcoin, was unveiled in early 2009.
On the one hand, cryptocurrency has undoubtedly gone from strength to strength, with hundreds and then thousands of different currencies being produced, and many high-profile investors jumping on the bandwagon – including the likes of Tesla. But 2022 has witnessed a sharp downturn in cryptocurrency fortunes, with the market losing a whopping $2 trillion in value, and experiencing a massive rise in debts, due to new lending schemes and issues with decentralization.
While this isn’t the first time the cryptocurrency world has encountered a drastic reduction in value, experts are in agreement that this new ‘winter’ is different from the previous major crash of 2017 and 2018. Read on to find out more.
The nuts and bolts of cryptocurrency
If you haven’t been keeping abreast of events in the realm of cryptocurrency to date, the gravity of the current decline may have passed you by. Fortunately, there are plenty of resources available to further your crypto education, giving you a deep dive into the different terminology you will encounter when reading about digital currency.
To give you a very quick overview of cryptocurrency’s journey over the past few years, let us take you back to 2017, when the market experienced a sharp rise in value. This surge in popularity was subsequently followed by the dramatic crash mentioned above. Various factors endemic to the industry were involved in that crash, among them fears about the high risk of hacks, as well as government restrictions on the trading of cryptocurrency in Asia, enforced by influential countries such as China and Japan. Cryptocurrency was also still struggling to enter the mainstream, with high-profile investors refusing to take it seriously.
However, digital currencies managed to bounce back in the ensuing years, with Bitcoin, in particular, strengthening its footing in the marketplace. But then, 2022 dawned, and winter returned to the world of cryptocurrency.
The winter of 2022
This new crypto winter is different from the previous major crash, as it has been triggered by a greater number of external factors, including current issues in the worldwide economy caused by Russia’s invasion of Ukraine, and soaring inflation rates.
More than one crypto project has come crashing to a halt, most notably TerraUSD, and Bitcoin experienced a new low after 17 months of recovery. Meanwhile, various cryptocurrency exchanges have found themselves having to lay off employees and even cease withdrawals.
Will the sun come out again for cryptocurrency?
While things undoubtedly look rather bleak in the crypto marketplace as we enter the second half of 2022, some experts posit that the world of digital currency could make a comeback, citing Bitcoin in particular as likely to undergo a resurgence. Despite the recent wobble in its fortunes, it seems that Bitcoin is still viewed by many investors as a relatively secure bet, and it has certainly shown its resilience over the last few years.
However, with so much uncertainty at play in the global economy in general, it remains to be seen how quickly cryptocurrency will recover from this particular winter.