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Join the most important conversation in crypto and Web3 taking place in Austin, Texas, April 26-28.

George Kaloudis is a research analyst for CoinDesk Research.

Consensus 2023 Logo
Join the most important conversation in crypto and Web3 taking place in Austin, Texas, April 26-28.

As with all financial assets, market performance is usually the first thing that comes to mind when considering a “year in review.” Bitcoin (BTC) and ether (ETH) followed a blistering-hot 2021 with a 65% and 67% pullback in 2022.

As for macro assets, their correlation behavior with bitcoin remains an unfinished story. Only bonds ended the year within an uncorrelated band to bitcoin while stock indices maintained a somewhat positive correlation, and the U.S. dollar index maintained a somewhat negative correlation.

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These market performance difficulties leaked into bitcoin mining companies as a perfect storm of headwinds led most of the publicly traded bitcoin mining companies to cede an immense amount of value. Of the five largest public bitcoin miners measured by bitcoin hashrate, the best performer was CleanSpark, which still lost 79%. Bitcoin’s hashrate marched steadily upward as mining machines purchased in the throes of the bull market came online. That, combined with poor bitcoin price performance, led to general difficulties in the mining industry.

That said, the amount of venture funding raised by blockchain and crypto companies increased in 2022, almost touching $30 billion. While the growth was far slower than it was in 2021, there was still plenty of venture capital invested as the venture funds that raised funds in 2021 needed to deploy that dry powder in 2022.

In the year of the bear market, we can find solace in the technology that continued to develop. The talk of the town for Ethereum was the successful implementation of the Merge, which moved the second-biggest blockchain from a proof-of-work consensus mechanism to a proof-of-stake consensus mechanism. Meanwhile, Bitcoin ticked along, with more nodes enforcing 2021’s Taproot upgrade while adding some exciting potential use cases to the Lightning Network – its commerce layer – through growth of the network and the announcement of Taro by Lightning Labs.

Meanwhile, it was a strange year in the world of policy. While massive legislative efforts such as the European Union’s Markets in Crypto Assets (MiCA) bill have crept closer to becoming law, few nations have actually implemented any new laws providing broad clarity for the treatment of digital assets. However, the massive failures in 2022 are likely to create new pressure for regulators to actually do something about the sector.

From a regulatory perspective, we’ve seen a majority of Ethereum transactions comply with the Office of Foreign Assets Control (OFAC) unit of the U.S. Treasury Department, which blacklisted the Tornado Cash mixer program in August and, in turn, led to one of its developers, Alexey Pertsev, being arrested.

Of course, any discussion of crypto in 2022 would be incomplete without discussing our first proper crypto credit crisis, which began with a glut of crypto lenders promising yield to customers in exchange for deposits and culminated with the arrest in the Bahamas and extradition to the U.S. of FTX and Alameda Research founder Sam Bankman-Fried (SBF). It was years in the making and it’s hardly the first credit crisis in financial history, but this one is definitively crypto’s.

CORRECTION (Jan. 9 17:40 UTC): The Merge involved the Ethereum blockchain, not the ether currency.


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George Kaloudis is a research analyst for CoinDesk Research.