The cryptocurrency market has been through a lot over the past two years.
Furthermore, the crash of one of the most influential exchanges, FTX, also corroborated to the general distrust in the market.
In 2022, digital assets had one of the worst years in history. The growing regulation concerns paired with rising interest rates in the post-pandemic world negatively affected currencies as a whole.
To put it in numbers, the total cryptocurrency market cap began 2022 being worth around $3 trillion. By December, that number had decreased to only $800 billion.
During that period, major assets like Bitcoin and Ethereum lost over 70% of their value, with other altcoins like Solana and Avalanche losing over 91%.
While it’s important to remember that cryptocurrencies are cyclical — and poor performances are expected — 2022 was so bad that it might have “broken” a lot of former cryptocurrency enthusiasts.
Chamath Palihapitiya Believes That Crypto is Dead
The tech investor Chamath Palihapitiya recently had harsh statements about digital currency investments.
During an episode of the “All In Podcast”, Palihapitiya expressed his concern about the current state of the market. He held strong views on how recent developments in American politics could potentially create a narrative that blames cryptocurrency for the impending recession.
“Crypto is dead in America,” the Canadian-American venture capitalist said with a slight grim on his face. “Now you have Gensler [SEC Chair] even blaming the banking crisis on crypto.
“The United States Authorities have firmly pointed their guns at crypto.”
The investor went on to explain that he believes that the growing inflation turned crypto into the biggest threat to the establishment.
Perhaps Palihapitiya is referring to bitcoin’s proven ability as a “hedge against inflation”. Over the years, the venture capitalist firmly believed that BTC could substitute gold.
Historically, gold investment booms during economic or geopolitical crises, which tend to negatively affect fiat currencies.
And during the 2020 pandemic, $BTC performed eerily similar to the precious metal. The asset surged by a whopping margin, reaching its all-time high in 2021.
In the following year, the Government has been doubling down on its intention to put digital currencies under regulatory scrutiny. Just recently, Gary Gensler testified in congress about the importance of regulating assets, to the point of classifying Ether as a security.
In addition, exchanges are also having a tougher time operating on American soil. Following the FTX crisis, Binance and Coinbase are constantly under scrutiny about their procedures in America.
But despite all of that, 2023’s crypto performance has been positive so far. The total market cap increased by over 60% since the turn of the year, with leading assets regaining some of their losses in the previous year.
It remains to be seen how much will regulations affect currencies going forward.