In less than a week in early November 2022, the FTX trading platform experienced rumors of a funding shortage, bank runs on its stored assets, frozen withdrawals, a potential acquisition proposal from Binance (quickly withdrawn), an investigation by the US Securities and Exchange Commission, suspicious transfers of large amounts of exchange tokens, a hack, and a global bankruptcy declaration by FTX and all affiliated parties. Ultimately, FTX was forced to halt withdrawals, resulting in huge losses for thousands of users and the cryptocurrency market as a whole. Within days, cryptocurrency lending platform BlockFi halted withdrawals and filed for bankruptcy on November 11th due to a massive shortfall in their exposure to FTX and Alameda Research’s hedge fund, with estimated debts ranging from $1 billion to $10 billion. The FTX collapse also had a severe impact on cryptocurrency trading platform Genesis, causing $2.8 billion in losses and forcing it to halt withdrawals on November 21st.
In 2022, the DeFi industry faced challenges including the collapse of the Terra Luna platform and a drop in cryptocurrency prices, resulting in a sharp 73.97% decrease in total value locked (TVL) to $55 billion in December. Despite these difficulties, the DeFi industry continued to expand and innovate, with smart contract financial applications and traditional financial institutions experimenting or transacting using DeFi protocols. Ethereum remained the dominant DeFi protocol with a TVL of $321.2 billion, a decrease of 74.56%. BNB Chain regained its position as the second-largest DeFi ecosystem, decreasing by 62.50% to reach $6.5 billion. Layer-2 solutions appeared to be the least affected by crypto volatility, with Arbitrum decreasing by 12.07% to $1.74 billion. Optimism’s TVL grew by 127.60% to reach $669 million.
The prediction for the NFT market appears to be favorable, generating approximately $25 billion in sales in 2022. Despite the uncertain factors of interest rates and inflation, ongoing wars and global conflicts, and other factors affecting markets during times of heightened volatility, NFT collectibles show strong and enduring signs. The market capitalization of the top 100 NFT collectibles has fluctuated significantly over the past year, but it is expected that the NFT market will continue to expand with the participation of numerous market players. By 2023, we can expect to see further development and experimentation of practical NFTs in both the crypto and traditional fields. Companies may start using NFTs to provide value and unique experiences to their owners. Overall, the disruptive and innovative potential of the NFT industry is worth watching in the coming years.
Although the P2E gaming industry experienced a serious downturn, with most major projects losing over 90% of their market value in 2022, even the virtual land NFTs representing gaming assets saw similar declines. However, the industry is turning towards a new era of blockchain gaming, prioritizing playability while addressing scalability and economic design issues. New perspectives include building strong communities, offering investment management services, developing technical products, providing value-added services, and creating immersive content. The potential to increase appeal and new mechanisms through NFTs that achieve true digital ownership and scarcity has increased, despite many challenges that still need to be overcome, but the industry is poised for future growth and mass adoption.
The regulatory environment of the blockchain industry is complex and constantly evolving. The major regulations in 2022 aimed to increase transparency and accountability based on blockchain systems, including licensing and registration requirements for crypto asset service providers, investor protection, and oversight of market participants, which may continue to be a focus in the future.
2022 was undoubtedly a series of peaks and valleys for the blockchain and crypto industry. Macro factors such as the Fed’s rate hikes, high inflation, layoffs, and slowing economic growth led to greater uncertainty. The challenging market environment largely became the norm for much of the year, and while cryptocurrencies faced negative impacts, the industry remained focused on developing and driving the next wave of blockchain applications. Blockchain technology remains powerful and is constructing various innovative projects to fundamentally change our financial system and provide the foundation for the economy. Additionally, it provides users with digital ownership and promotes self-custody. If cryptocurrencies prove anything through their existence, it is that they can survive adverse times. It is because of this that the blockchain industry will enter 2023 with the strength and durability that 2022 has given it. There is no doubt that another bull market will come, and it may be much stronger than the previous one. When the market faces difficulties, survivors ultimately become stronger and drive innovation for the next generation of financial assets, providing users with higher quality products and services.