As we enter the year 2023, it is time to pause and reflect on the achievements and struggles that the global crypto community has witnessed over the past 365 days. Since the beginning of 2022, no investment strategy could help to recover the fallen portfolios in the traditional and cryptographic ecosystems. January 2022 inherited a slightly crashing market, in which investments made at 2021 record high prices resulted in immediate losses.

For many, especially new entrants, the fall in cryptocurrency prices was perceived as the end of the game. But what went unnoticed was the community’s resilience and achievements in the face of a global recession, orchestrated hacks and scams, and a relentless bear market.

As a result of falling prices, 2022 also inherited the hype from 2021 around non-fungible tokens (NFTs), the Metaverse, iconic all-time highs for Bitcoin (BTC) and other cryptocurrencies.

Economies around the world suffered from massive inflation as the most influential fiat currencies succumbed to ongoing geopolitical pressures. Falling investor confidence in traditional markets seeped into cryptocurrencies and falling ecosystems only added to the bad sentiments.

A year full of interruptions

Amid the poor market performance, the crypto community focused on strengthening its core. This meant releasing blockchain upgrades and introducing faster, cheaper and more secure features and capabilities, all driven by consensus from the respective communities. As a result, 2022 was a landmark year for leading crypto ecosystems.

Bitcoin received a much-requested upgrade to its Layer 2 Lightning Network (LN) protocol. The LN improved privacy and efficiency thanks to a November 2021 update called Taproot. The Bitcoin Taproot update saw several implementations at the protocol level to improve privacy and efficiency. It also helped reduce the size of the database, an essential factor in slowing down the explosion in the size of the Bitcoin ledger.

By May 2022, Bitcoin was already halfway through the next halving, an event that cuts mining rewards in half, the only way new Bitcoin is released. The reward for confirming Bitcoin transactions is halved every 210,000 blocks. Bitcoin’s last halving event occurred on May 11, 2020, when it was trading at the $9,200 mark.

The total supply of Bitcoin is capped at 21 million by design. Therefore, a halving event further reduces the amount of Bitcoin that is released to the market. A resulting shortage due to the historic halving event worked in favor of the Bitcoin price.

Living up to the expectations of industry insiders, Bitcoin rallied over several months to hit its all-time high in November 2021 and was able to hold its value well above $15,000 until the end of 2022, Cointelegraph data confirms. Markets Pro.

Bitcoin price during the last halving event. Source: CoinMarketCap

The Ethereum community welcomed the highly anticipated Merge update, which saw the Ethereum blockchain transition from a proof-of-work (PoW) to a proof-of-stake (PoS) consensus mechanism. The most significant impact of the upgrade was a drastic reduction in power consumption. The broader crypto community is counting on this lower power usage to reignite interest in Ether-power sub-ecosystems such as NFTs.

Crypto Resilience Against Traditional Markets

History shows that two factors play a crucial role in the performance of the crypto market: the price of Bitcoin and investor sentiment. Both factors seemed to be missing throughout the year.

Timeline of crypto events vs. market capitalization. Source: CoinGecko

The crypto ecosystem was plagued by a series of attacks, unprecedented sanctions and bankruptcy filings, which multiplied the impact of the global recession on the market. In addition to poor price performance, some of the most prominent scars for investors of 2022 include the crash of FTX, 3AC, Voyager, BlockFi, and Terraform Labs, in which investors lost access to all their overnight funds to the morning.

In the midst of this upheaval, entrepreneurs once beloved by the masses ended up breaking the trust of millions, namely former FTX CEO Sam Bankman-Fried and Terra co-founder and CEO Do Kwon.

Despite the added hurdles, the Bitcoin and crypto ecosystem not only survived but also showed resilience never seen before. Traditional store-of-value investments, such as gold and stocks, have also suffered a similar fate. Between January and December 2022, gold investors posted a net loss of 0.3%.

Stocks of major companies have also underperformed this year, including Apple (-25%), Microsoft (-29%), Google (-38%), Amazon (-49%), Netflix (-51%) ), Target (-65%). %) and Tesla (-65%).

Annual performance of the traditional market giants. Source: LinkedIn

Bitcoin started strong with a price of $47,680 in January 2022, but declining investor confidence, fueled by rising inflation, energy prices, and market uncertainties throughout the year, managed to drive prices down. by more than 60% in December.

Setting the stage for a stronger foundation

Time and time again, bear markets have taken it upon themselves to weed out bad actors and offer the opportunity for promising crypto projects to show their true value to investors beyond price.

The noise around price fluctuations couldn’t stop the Bitcoin network from hardening its core against double spend attempts, i.e. 51% attacks. Thanks to the widespread mining community, hash rate and network difficulty, two important security metrics based on computing power, reassured bitcoiners that the blockchain network was well protected. Throughout the year, the Bitcoin network consistently posted new hash rate all-time highs and ended the year in the 250-300 Exahashes per second (EH/s) range.

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Other prominent players in the crypto ecosystem have also released the system and feature updates as they prepare for 2023. For Polygon Technology, an Ethereum-based Web3 infrastructure, it was the launch of the zero-knowledge Ethereum Virtual Machine, or zkEVM, a layer-2 scaling solution aimed at reducing transaction costs and improving scalability. Decentralized finance (DeFi) aggregator 1inch Network has released the Fusion update to offer profitable, safe and profitable exchanges for crypto investors.

The legalization of Bitcoin in El Salvador did not go unnoticed, especially considering that the country’s Bitcoin takeover from 2021 shared the same fate as other crypto investors. Regardless, the President of El Salvador, Nayib Bukele, doubled down on this decision when the country announced the purchase of BTC daily starting on November 17.

One of the immediate impacts of this move is a reduction in the average purchase price in El Salvador. A planned buying of Bitcoin dips combined with a subsequent market rally makes the country well positioned to offset unrealized losses.

In countries with high inflation, Bitcoin has helped numerous people retain their purchasing power.

Expect a return of the hype

While 2023 will not be lucky enough to witness the next Bitcoin halving, it will play a crucial role in the return of the crypto ecosystem. With aggressive blockchain upgrades, updated business strategies, and investor attention back on the menu, the ecosystem is now gearing up for the next wave of disruption.

For investors, 2023 will be a year of recovery, of losses and mistrust of self-preservation and informed investments. “Making it” in crypto is no longer just about becoming a millionaire overnight; it is about creating, supporting and preaching a new perspective on the future of money.