[Feature] Will Crypto Winter Become an Ice Age or is Spring Round the Corner in 2023?

2022 year in review is by no means smooth sailing. With just a few days before a brand new year starts, will 2023 be so dire for crypto that it becomes an eternal ice age or will spring bring back some colour and life into the crypto industry?

Gone were the days when the crypto world was booming, with cryptocurrencies at their all-time highs (ATH), celebrities showing off or showcasing their prized NFTs, and blockchain companies’ logos gracing places and in advertisements. 2022 is one hell of a ride for those involved and a popcorn-worthy movie for spectators. At the time of writing, it has been thus far a pretty lacklustre week for crypto:

Bitcoin (BTC) is at $16,566, Ethereum (ETH) is at $1,194.20, Binance (BNB) is at $245, Cardano (ADA) is at $0.2460, Solana (SOL) is at $18.0175, among others.

Source: Tradingview

Prices falling like it is monsoon season and companies collapsing in liquidity crises are a norm this year, with the arrest and bailout of Sam Bankman-Fried (SBF) being the most recent news. Even though the crypto industry has termed it “crypto winter” and feels that it will eventually blow over like a bear market for Wall Street, but experts believe the ferocity and scale of this downturn could lead to more of an ice age. A law professor at Vanderbilt University, Yesha Yadav, who closely follows crypto regulation, expressed that “where we are is at a deeply existential point for the industry.”

According to CoinMarketCap, the total value of the world’s crypto is around $795 billion, down from $3 trillion a year back.

Based on CoinGecko, the average value of daily crypto trades has fallen from $131 billion in May to $57 billion in December.

Crypto has crashed before (the crypto winter from January 2018 to December 2020 with a period of incredible growth lasting for most of 2021) but the fall this time was more catastrophic and from a greater height. Jake Weiner, founder and CEO of Uncommon, commented with a slightly more optimistic tone, “If the market remains in contraction for long enough, it is not only poor companies that will suffer ─ but some great ones too. The good news for those companies is that, unlike past crypto winters, a lot of crypto [venture capitalists] have already amassed war chests that they will continue to deploy.”

“In my view, crypto is just the next new technology, and every new technology has these rises and falls,” Lou Kerner, CEO of Blockchain Coinvestors Acquisition Corp. I, pointed out.

Paul Brody, global blockchain leader at professional services firm EY, expressed on 20 December that “one of the reasons why we have such extensive contagion in crypto is because there is no lender of last resort and without a lender of last resort, contagion flows to the system with no breaks. One of the big problems that we’re having right now is that normally in any kind of collapse, you have something that people talk about as a flight to quality. Investors look around for the most stable, the most mature, the best regulated player out there. And what they’re looking around and discovering is there are very, very few publicly traded, deeply regulated, exhaustively audited players out there, and that’s actually I think, having a negative impact on this.”

So then, will crypto finally see hints of spring in the coming year? It will definitely not be immediate. As to whether or not crypto will recover, this grim question is definitely on many people’s minds, particularly investors. David Kemmerer, CEO of CoinLedger, feels that this winter is here to stay for some time and attributes that to macroeconomic factors which include “40-year highs in inflation, rising borrowing costs, and political instability after Russia invaded Ukraine.”

Thus far, the market is divided on this ─ some feel that crypto will recover and bounce back, others feel that it will not be the same. With crypto, things can go both ways, fast.

Do you think crypto winter will persist at length in 2023 or will winter thaw and spring arrive?