The year 2022 was one to quickly forget for Bitcoin. If we had to single out three things that were responsible for the negative rates, they would undoubtedly be the implosion of Terra in May, the collapse of FTX in November and, of course, the US Federal Reserve’s brutal interest rate hikes. Meanwhile, the momentum is starting to move in the right direction again, but we are not there yet.
The past year in a nutshell
Starting with the two most important industry events of the past year, the spectacular implosions of Terra and FTX. For the first few months of 2022, the optimism surrounding Terra and the project’s UST stablecoin was gigantic. Terra even started buying large amounts of Bitcoin to cover the value of the stablecoin. Many people felt that Do Kwon and his team had figured out a way to keep an algorithmic stablecoin alive.
That changed completely on May 12, 2022. Terra’s stablecoin lost its peg to the US dollar, trillions of LUNA had to be printed to save the project, and Bitcoin reserves also failed to provide the support it needed. With the collapse of Terra, more than $ 40 billion in assets went up in smoke and large parties within the industry ran into problems.
The Bitcoin price fell sharply and parties such as Three Arrows Capital and Celsius also turned out to be too dependent on the project. That resulted in a chain reaction of bankruptcies, which eventually also affected FTX. For a long time, however, things seemed to be going very well with the stock exchange platform.
FTX, Alameda Research and Sam Bankman-Fried even seemed like the industry’s saviors at times. In the media it seemed like they wanted to throw billions to keep things afloat. But in November 2022, we found out that this was all bluff from FTX and that the exchange platform itself was anything but in order. As a result of the fall of FTX, the Bitcoin price eventually even crashed to $ 15,500 each.
The bull returns
Now we are just over two weeks into the new year and the bullish momentum is starting to return unexpectedly quickly. Unexpectedly fast, because little has changed in the macroeconomic situation. Inflation has fallen sharply at the time of writing, but is still at 6.5 percent in the United States. This puts us far from the Federal Reserve’s target of 2 percent.
In that respect, the chance is small that we will have to deal with interest rate cuts in the short term. In fact, the Federal Reserve is expected to raise interest rates by 0.25 percent in both February and March. Everyone in the Federal Reserve is also unanimous that interest rates cannot be lowered in 2023 in any case.