The king of cryptocurrencies started the new year as it ended 2022.
The transition to the new year has not been particularly upsetting for cryptocurrencies, and for Bitcoin in particular.
The king of digital currencies was down 0.2% at $16,551.22 in the past 24 hours, according to data firm CoinGecko.
Cryptocurrency prices did not move much in the last week of 2022. Bitcoin (BTC) prices thus closed the last week down almost 2%. Over the past year as a whole, the first cryptocurrency in the world in terms of market value has seen its value collapse by 65%.
This fall has impacted the entire cryptocurrency market, the value of which has fallen below $1 trillion. This market is currently worth $828 billion compared to over $3 trillion in November 2021.
For the first day of 2023, the crypto market was down 0.4%.
Cryptocurrencies are impacted by different factors.
There are external reasons such as the fact that investors now treat crypto assets like technology stocks. This means that they liquidate them as soon as there are economic uncertainties as is currently the case.
Many economists are predicting, for example, a recession in the United States in 2023. To prepare for this sharp slowdown in economic activity, many investors are reducing their exposure to risky assets such as cryptocurrencies.
The sector suffers above all from numerous scandals linked to the crypto sphere. There was the liquidity crisis that affected many prominent crypto lenders in the summer of 2022 following the unexpected collapse of sister tokens Luna and UST, or TerraUSD.
This debacle led to the liquidation of hedge fund Three Arrows Capital, or 3AC, the bankruptcy of Voyager Digital and Celsius Network. Above all, it weakened firms like BlockFi and Robinhood (HOOD) – Get Free Report, allowing the emergence of a saviour, Sam Bankman-Fried, who would himself go bankrupt several months later.
Bankman-Fried, the former emperor of the crypto sphere, filed for Chapter 11 bankruptcy of his crypto empire on November 11. This empire was composed of the FTX cryptocurrency exchange and the hedge fund Alameda Research.
This bankruptcy was a real earthquake in financial circles because FTX was for example valued at $32 billion in February. Regulators are still trying to piece together what happened.
They have filed a series of criminal and civil charges against Bankman-Fried whom they accuse of defrauding FTX and Alameda customers and investors.
“Bankman-Fried was orchestrating a massive, yearslong fraud, diverting billions of dollars of the trading platform’s customer funds for his own personal benefit and to help grow his crypto empire,” the Security and Exchange Commission (SEC) alleges in its civil complaint.
This scandal has already caused BlockFi to file for bankruptcy and could impact other firms according to industry sources. FTX’s fall has yet to reveal all of its nasty surprises.
In the meantime, it impacts cryptocurrency prices. Besides BTC, Ether (ETH), the second cryptocurrency by market value, started the year down 0.5% at $1,195.06. The drop is 2.1% over the past seven days.
Meme coins Dogecoin (DOGE) and Shiba Inu (SHIB) are down 2% and 1% respectively for the first session of the year.
The crypto sector is also suffering from regulatory uncertainties as disaffection and distrust from the general public has never been higher.