The cryptocurrency market & DeFi industry faced significant challenges during the second quarter of 2022, as coins saw a downward trend and failed to recover in Q3 & Q4. The collapse of Terra (LUNA) in May had severe consequences, resulting in the bankruptcies of Celsius, Voyager, and Three Arrows Capital. In August, the Federal government imposed sanctions on Tornado Cash, and in November, FTX collapsed, leading to the bankruptcy of BlockFi, causing a domino effect of concerns for Genesis and Digital Currency Group. The global community continues to closely follow developments in the cryptocurrency sector, for a mixture of reasons that are mostly bearish.
Despite these challenges, there were moments of progress in the industry that may have been overlooked due to the widespread panic over the alleged fraud of Sam Bankman-Fried and other factors that led to the crypto disaster of 2022.
The Ethereum Merge
After much anticipation and numerous delays, the Ethereum merge event finally took place in September 2022 and was a glowing success. Ethereum, the second largest cryptocurrency, transitioned from a proof-of-work mining system, which is energy-intensive and has been criticised by environmentalists, to a proof-of-stake mechanism that uses 99% less electricity.
The full impact of this transition may not be fully understood for years, but it could position Ethereum to rival Bitcoin in terms of adoption and potentially even value in the future. Despite the fact that the price of ETH did not significantly change after the event and the mainstream reaction was relatively muted, the merge should not be underestimated. It occurred at a time when the U.S. economy was in a downturn, inflation was rising, and nearly every investment asset class was performing poorly.
Legislation Talks are Promising
In the cryptocurrency industry, regulation is often seen as a negative force that hinders innovation. This is because the original appeal of cryptocurrency for many was the ability to decentralise and operate outside of government oversight. However, it has become clear that this is not a realistic goal for most projects, as evidenced by the recent sanctions on Tornado Cash. The future of cryptocurrency is likely to involve more regulation than some purists would prefer, but it is important to note that regulation does not necessarily mean interference.
It is worth noting that there are encouraging regulatory developments happening while much of the cryptocurrency industry is focused on the potential negative impact of Gensler and the SEC. President Biden’s executive order on cryptocurrency from March should also be viewed as a positive sign, as it called for various agencies to work together to develop a regulatory framework for the industry, rather than shutting it down. In Europe, the European Parliament passed a legislative package on cryptocurrency in March 2022 that specifically stated the intention to ensure that the regulatory framework is supportive of innovation and does not obstruct the adoption of new technologies.
NFTs Attracting More Big Brands
In 2022, a growing number of big brands embraced non-fungible tokens (NFTs), including Tiffany, Adidas, Starbucks, Bud Light, Instagram, and Reddit, despite a decrease in NFT trading volume. These brands may have recognised the potential value of NFTs and believe that they are worth incorporating into their business strategies. Polygon was chosen as the blockchain partner for three of these brands, which suggests that they see value in the technology as well. It is possible that these brands are ahead of the curve and have correctly identified the potential of NFTs, rather than being wrong or misguided in their adoption of the technology.
Big Investments Continue to Pour In
Despite criticism or scepticism from some, venture capital firms continue to invest in Web3 technology. Andreessen Horowitz (a16z), a prominent player in the Web3 space, raised $4.5 billion for a fourth fund focused solely on cryptocurrency and blockchain. Haun Ventures, founded by a16z alum Katie Haun, raised $1.5 billion for crypto investments, and Pantera raised $1.3 billion for a blockchain fund. Additionally, several cryptocurrency companies and projects received funding during the “crypto winter,” including Fireblocks ($550 million), ConsenSys ($450 million), Secret Network ($400 million), NEAR ($350 million), Chainalysis ($170 million), Keyrock ($72 million), and Ramp ($70 million).
Verdict: Reason for Hope Moving Forward
These good news stories from 2022 indicate that firms believe in the potential of Web3 & NFT technology and are willing to continue investing in it despite the crypto disaster of 2022 and current market conditions, major developments are ongoing and exciting, and legislation can be a good thing if done well. 2023 is starting to look a lot more promising for the cryptosphere and Web3!
This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Crypto-News