As with all financial assets, market performance is usually the first thing that comes to mind when thinking of "years of control." Bitcoin (BTC) and Ether (ETH) had an incredible 2021 with declines of 65% and 67% in 2022.
As for macro assets, their behavior with Bitcoin remains an incomplete story. Only bonds ended the year in a range uncorrelated to bitcoin, while equity indices maintained a modestly positive correlation and the US dollar index maintained a modestly negative correlation.
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Like a perfect storm, these market performance challenges hit bitcoin miners as they forced many publicly traded bitcoin miners to lose large amounts of their value. Among the top five public bitcoin miners as measured by bitcoin hashrate, CleanSpark continues to perform best, down 79%. Bitcoin's hashrate has been rising steadily since miners went online at the height of the bull market. This, combined with Bitcoin's low price, has caused general problems in the mining industry.
At the same time, the amount of venture capital funding attracted by blockchain and crypto companies has increased to around $30 billion in 2022. Though growth is slower than 2021, there is plenty of venture capital for VC funds raised in 2021 to deploy this dry powder in 2022.
In the year of the bear, we can take solace in technology, which is constantly evolving. A major theme of Ethereum was the successful implementation of Merge, which transformed the second-largest blockchain from a proof-of-work consensus mechanism to a proof-of-play consensus mechanism. Meanwhile, Bitcoin has moved forward with more nodes thanks to Taproot's 2021 update, network growth, and Taro Lightning Lab's announcement of the Lightning Network -- adding some interesting potential uses for its commercial tier.
A strange year has passed in the world of politics. With large-scale legislative efforts like the European Union's Crypto Asset Markets Bill (MiCA) about to go into effect, several countries have introduced new laws that bring more clarity about digital assets. However, massive breaches in 2022 could put renewed pressure on regulators to actually do something about the sector.
From a regulatory perspective, we see that most Ethereum transactions comply with the US Treasury Department's Office of Foreign Assets Control (OFAC), which blacklisted Tornado Cash Mixer in August, leading to Alexi, one of its developers. Pertsev was arrested.
Of course, any discussion of cryptocurrency in 2022 would be incomplete without discussing our first true crypto credit crisis, which began with a series of crypto lenders promising customers profits in exchange for deposits and ended with arrests and extradition to the Bahamas. Sam Bankman-Fried (SBF), Founder of FTX USA and Alameda Research. This isn't the first credit crunch in the long history of finance, but it certainly is cryptocurrency.
Find this and more in CoinDesk Research's Annual Crypto Review 2022.
Correction (January 9, 17:40 UTC): The merger affected the Ethereum blockchain, not the Ether coin.