People’s prediction of Bitcoin last Christmas takes a twist. Bitcoin and other major cryptocurrencies ended a dismal 2022 peacefully in December. A month characterized by low volatility and minimal price change in the cryptocurrency market.
The drama surrounding the collapse of the crypto exchange FTX, including the arrest and extradition of FTX founder Sam Bankman-Fried in December, remains a focal point for the markets. In the meantime, FTX’s demise has rekindled calls for increased crypto space regulation.
In 2023, crypto industry analysts anticipate investors will face additional challenges as rising interest rates continue to impact the pricing of risk assets.
Performance of the Crypto Market in December
In November, the bankruptcy of FTX brought Bitcoin prices to fresh two-year lows below $15,600. However, Bitcoin prices steadied in December.
In December, the price of Bitcoin grew by 1%, ending 2022 at $16,500. Then in December, the price of Ethereum (ETH) fell another 1.4% to end the year at $1,199. In 2022, the price of Bitcoin fell by about 65%, its worst annual performance since its 73% collapse in 2018. Also, Ethereum prices fell by 67.7%.
The rising interest rates prompted crypto winter, resulting in a wave of crypto industry bankruptcy and plunging values for the most popular coins. TRON was the best performer among the top ten cryptocurrencies by market capitalization and had a 27% drop. Polkadot (DOT) was impacted the most, with an annual price decrease of 83.6%.
In November 2021, the entire market capitalization of the global crypto market surpassed $2.9 trillion. This market capitalization is at $798 billion as of the end of 2022.
FTX Fallout Continues
In November, the chaos in the cryptocurrency market reached its zenith. The once-worth-$32 billion cryptocurrency exchange FTX filed for bankruptcy protection. On November 11, CEO Bankman-Fried resigned. On November 22, FTX initiated bankruptcy procedures in Delaware federal court.
At the request of the U.S. government, Bahamas officials arrested Bankman-Fried on December 12, just one day before he was supposed to testify before the House Financial Services Committee.
The U.S. Securities and Exchange Commission (SEC) filed a civil fraud claim against Bankman-Fried on December 13. Alleging, he fraudulently utilized FTX customer cash to operate his Alameda Research hedge fund. On the same day, the U.S. attorney’s office for the Southern District of New York filed eight counts of criminal fraud against Bankman-Fried.
December 21, Bankman-Fried was brought to U.S. custody after a judge approved his extradition.
Caroline Ellison, the former chief executive officer of Alameda Research, and Gary Wang, the former chief technology officer of Alameda, pled guilty to criminal charges in December and are working with federal investigations of FTX.
Marcus Sotiriou, an analyst at GlobalBlock, suggests that the atrocious behavior of FTX insiders may aid in preserving crypto’s reputation with the broader public.
“It is remarkable to watch how quickly things collapsed when almost no one was aware of the fraudulent operations a month ago. “I believe this will improve the public’s opinion of the cryptocurrency business. As consumers will be able to rest confident that this fall is due to fraud and not an inherent flaw in cryptocurrencies,” Sotiriou says.
On December 23, Bankman-Fried was released on a $250 million bond, and his next court date is scheduled for January 3.
Additional December Cryptocurrency News
The fall of FTX sparked fears of contagion in the cryptocurrency sector, especially following November 28, when crypto exchange BlockFi filed for bankruptcy protection.
The popular cryptocurrency exchange Binance experienced $6 billion in customer withdrawals in just three days at the beginning of December. Mazars deleted a report on Binance’s reserves from its website and announced a halt to all cryptocurrency-related client activities. Binance has sought out prominent accounting companies to create a proof-of-reserves report to reassure investors but has yet to find a firm ready to collaborate with a private cryptocurrency startup.
Circle Internet Financial, which operates the stablecoin USDC, announced on December 5 that it is abandoning its plan to go public through a merger with a special purpose acquisition company. Circle stated that it still intends to go public but has not established the timing or strategy.
Grayscale Investments, which manages the popular $10.5 billion Grayscale Bitcoin Trust (GBTC), announced on December 19 that it is exploring a tender offer for up to 20% of its shares. Suppose it cannot convert the trust into an exchange-traded fund. In June, the SEC denied Grayscale’s request to convert the GBTC trust into the first publicly-traded spot Bitcoin ETF. In response, Grayscale filed a lawsuit against the SEC.
The GBTC trust is selling at a record-breaking 48% discount to its net asset value due to the uncertainty surrounding its future. If Grayscale loses its lawsuit against the SEC, the company has indicated that it may repurchase shares of the trust directly from investors.
2023 Cryptocurrency Market Forecasts
In 2022, cryptocurrencies posted their worst performance since 2018, but investors anticipate a repetition of the 2019 market comeback in 2023.
Bitcoin exchange Bitbank initiatives Bitcoin prices will return to between $20,000 and $50,000 in the second half of 2023. Only if the Federal Reserve can cease raising interest rates by mid-2023 and begin decreasing them by early 2024.
Matthew Sigel, a VanEck analyst, forecasts Bitcoin’s price will return to $30,000 in 2023 but warns it may linger in the $10,000 to $20,000 area in the first quarter of 2019.
Standard Chartered has warned investors that the crypto winter will continue until 2023, resulting in additional liquidity concerns and bankruptcies, and further erosion of investor trust. In 2023, according to Standard Chartered, Bitcoin values could decline another 70% to approximately $5,000.