Digital asset data provider Kaiko has published an analysis of the top crypto events, summing up 2022 for the crypto industry.
These include the active use of digital assets against the backdrop of Russian military aggression in Ukraine, Terra and FTX bankruptcy, the crypto lending crisis, the Binance hegemony, the Uniswap development, and The Ethereum Merge. In the Kaiko report, each event and phenomenon has been studied in detail, and we have highlighted the main points.
Rise in the use of stablecoins amid war
USDT / UAH trading volumes increased five-fold compared to the beginning of the year after Russia invaded Ukraine. Fleeing not only from missiles and the depreciation of the hryvnia, people have found refuge in stablecoins.
Cryptocurrencies have become a weapon for Ukraine on the economic front, so their use was legalized in March. The country has received over $100 million in crypto donations.
Terra Collapse
TerraUSD is the fastest-growing asset in the history of cryptocurrencies that has failed. The capitalization of the stablecoin jumped from $2 billion to $18 billion in just six months, and in a couple of days, the asset's value depreciated to the minimum. This led to the collapse of the entire Terra ecosystem.
The circumstance reminded us of one important rule: too attractive yield will almost certainly lead the project to the bottom. Terra collapse also showed how important it is to analyze the data on the network to find warnings of an impending disaster.
Crypto Credit Crisis
Following the collapse of Terra, centralized crypto lender Celsius, with $12 billion in assets under management, suspended withdrawals. The lender succumbed to the collapse amid poor liquidity, poor risk management, and a bear market.
The credit crisis in the cryptocurrency sector is still ongoing, harming market conditions.
Binance Dominance
Over the summer, Binance removed fees for 13 BTC spot trading pairs. This led to an increase in traders on the exchange. As a result, the dominance of the crypto exchange in the market increased from 43% to 72% at the beginning of 2022. However, the platform's hegemony in the market may end, as it endured $6 billion of outflows in December over concerns about the unreliability of its proof-of-reserves report.
Traders prefer transparency, so in 2023, many users may move to more regulated, centralized crypto exchanges.
Uniswap Evolution
Decentralized exchange Uniswap decided to compete with centralized exchanges in 2022. Its trading volumes almost reached the level of Coinbase. This is likely due to the large selection of coins that are available on Uniswap and the low fees.
In addition, the exchange accounts for over 80% of the DEX trading volumes launched on Ethereum.
The Ethereum Merge
The most anticipated event of 2022 in the crypto industry is the transition of Ethereum to the Proof-of-Stake consensus algorithm in September. The upgrade marked a significant milestone in the history of the network, reducing the power consumption of the blockchain by 99%. On the eve of The Merge, the cryptocurrency market was saturated with capital throughout the summer. In August, interest in Ethereum perpetual futures rose to $6 billion, hitting a yearly high.
FTX Bankruptcy
The FTX collapse shook not only the crypto industry, but also became widely discussed outside of it, as the cryptocurrency exchange was considered by many to be reliable and safe, and it had a solid reputation.
However, it is now clear that its native FTT token was extremely vulnerable, with little utility, liquidity, and demand. If crypto market players do not want to fall victim to the next bankruptcy, crypto companies' business models and balance sheets must undergo thorough scrutiny, and become more transparent and regulated.
In 2023, the cryptocurrency market will continue to be influenced by a possible global recession and low liquidity. Nevertheless, it is predicted that the US Federal Reserve and other central banks may reduce the pace of rate hikes in the upcoming year.
