From fueling a hot NFT market to rivaling gold as a “safe haven” asset during multiple COVID-19 pandemics, many believed that cryptocurrency had reached a level of legitimacy that would give it staying power.
Then it seemed that the market had spent too much time in the sun.
From multiple attacks, to the war in Ukraine, to investors simply giving up the extreme level of electricity and computing power to mine new coins, the market has crashed.
For the incumbent Bitcoin currency, the numbers were dire. At the beginning of 2022, one Bitcoin was worth as much as $AUD 75,000.
Today, that same asset is worth just $AUD 25,000, a nearly 70 percent drop in value. If the housing market had the same drop, there would be riots.
But after a miserable end to 2022, which ended with the collapse of the FTX exchange and charges brought against its founder, some believe that cryptocurrencies may rise again.
Simon Peters, a crypto market analyst at social investment network eToro, says that some cryptocurrencies may start to offer good value to investors over the long term.
“This year was a torrid year for the crypto asset market. However, the 'crypto winter' could give way to a 'crypto spring,'” Peters said.
When evaluating Bitcoin, he believes that the market may have already bottomed out.
"A popular 'on-chain metric' for identifying the top and bottom of the bitcoin price is the MVRV-Z score," Peters explains.
"Currently, the score indicates that bitcoin's current market value is well below its realized or 'fair' value and at the lowest levels since December 2018, the nadir of the last bitcoin bear market.
“Getting to this point has historically been a good indicator that we are near the end of a bitcoin price cycle and suggests that we could be closer to a 'crypto spring'.”
Regulation of financial bodies, while often a deterrent to hot markets, can actually prove beneficial for cryptocurrencies given their past ties to those operating outside of legitimate financial markets.
“Without a doubt, regulation is top of mind for 2023, and investors, platforms, and cryptocurrency users alike will appreciate it,” says Peters.
“Ensuring that best practices such as segregation of client assets, correct collateralization and reconciliation are followed, as well as transparency, will be very important to both regulators and crypto market participants seeking a more sustainable market. after the events of this year.
"It will also be key to rebuilding trust."
A key barrier in the way of Bitcoin, and consequently of the cryptocurrency as a whole, is not legitimacy or regulation, but the environment.
Mining Bitcoins requires a staggeringly high amount of electricity. It is estimated that the energy required to mine a single Bitcoin at current rates would be equivalent to the electricity consumption of a traditional Australian household for 15 years.
Investors are turning away from traditional fossil fuel assets, particularly during a cost-of-living crisis.
"Hash rate and difficulty continue to rise to all-time highs for bitcoin. While this makes the Bitcoin network more secure, mining operations need more computing power to stay competitive, which could continue to increase overall hash rate consumption." grid power". Peters says.
"Therefore, energy consumption will continue to be a bone of contention in the cryptocurrency sector, with bitcoin enthusiasts quick to explain why it's not a bad thing, and Ethereum advocates pointing to the big drop in energy intensity." .
"Despite the backdrop of an ongoing energy crisis around the world, the debate will remain as intractable as ever."
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