This is partly down to the state of the economy… well, everywhere. Inflation is at 40-year highs. The S&P 500 is down almost 17% and the Nasdaq 30%.
But Bitcoin has plunged by about 75% — and a pretty good chunk of that is self-inflicted. The collapse of the Terra/LUNA stablecoin ecosystem not only deleted $48 billion in value from crypto investors, it sent a wave of bankruptcies out across crypto lenders. They had been signing up millions of people and offering interest rates of up to 20%, while banks were delivering well under 1%.
Crypto didn't have a level drop. In three one-week periods, Bitcoin suffered huge collapses. In May, June and November.
May corresponds with the collapse of the UST stablecoin; June with the one-two punch of record inflation and the Fed's first triple-size 0.75 percentage point rate hike along with the collapsing crypto lenders; and November was all Sam Bankman-Fried, as world's second-largest crypto exchange, FTX, loaned $10 billion of its customers' fund to sister trading firm Alameda Research on the sly, which promptly lost $8 billion, imploding his empire.
January 1: $47,686.81 January 31: $38,483.13
When Bitcoin's 13th anniversary rolled around on the third of the month, BTC was in a fairly normal slump that didn't really have many serious supporters concerned.
Goldman Sachs was about to "become the latest investment bank to predict that Bitcoin has the potential to hit $100,000," and suggested it would "continue wrestling market share away from gold."
By the end of the week, the tone had begun to change. The Crypto Fear & Greed Index had hit 15, the Federal Reserve was tightening the money supply more aggressively, and crypto investment firm Galaxy Digital's Mike Novogratz suggested that BTC might dip below $40,000 — but only by a little bit — before bottoming out.
The faithful were still faithful as the month rolled on. Billionaire Bill Miller revealed that a staggering half his net worth was in Bitcoin — although he still said mere mortals should target 1% — Jack Dorsey was talking about making Bitcoin mining's profits more accessible to the masses, and Michael Saylor, then still CEO of Bitcoin mega-buyer MicroStrategy, was confident that Bitcoin remained the "best defense against inflation."
But the cracks were beginning to form. A Morgan Stanley survey found just 5% of its customers believed Bitcoin would cross $100,000 in 2022. Cathie Wood's Ark Invest was still talking about BTC surging past the $1 million range, but by 2030 — a long way off.
By the third week of the month, Bitcoin was now solidly below $40,000 and had dipped close to $33,000, crypto's market capitalization had fallen well below $2 trillion, and "risk assets" were getting hammered by the bond market.
Bitcoin began the month by ramping back up into the low $40,000s — up 30% from its January dip, reaching briefly past $45,000 about a week-and-a-half in.
But it was becoming more and more clear that Bitcoin — and really, all of crypto — was joined at the hip to the stock market, which was looking a bit wobbly after a long bull market.
Tesla's high-profile $1.5 billion Bitcoin buy gave a good snapshot of the market: Down $100 million this year, Elon Musk was still $400 million in the black. Meanwhile, enough bullishness remained that KPMG Canada still felt that Bitcoin was a "maturing asset class" and that the "investment reflects our belief that institutional adoption of cryptoassets and blockchain technology will continue to grow and become a regular part of the asset mix."
Later in the month, Pantera Capital CEO Dan Morehead would predict (wrongly) Bitcoin and the stock market would be decoupling soon and that "blockchain is the best relative asset class in a rising rate environment." Digital assets, he added, would become more attractive as the Fed began increasing interest rates in March. But Huobi's Du Jun warned later in the month that another bull run would likely not come until late 2024 or even 2025.
El Salvador's President Nayib Bukele, meanwhile, was even more emphatically bullish — telling the International Monetary Fund (IMF) and then the U.S. Senate to "stay out of [El Salvador's] internal affairs." Of course without the billion-dollar IMF loan it had been negotiating, the country may face a bond default in 2023.
Finally, the biggest crypto crime news was not the loss of crypto to hackers — a trend that would grow explosively throughout the year — but its return. The Department of Justice announced the arrest of Ilya Lichtenstein and Heather Morgan for the 2016 Bitfinex hack, along with the seizure of $3.6 billion worth of the $4.5 billion stolen.
March 1: $44,354.64 March 31: $45,538.68
Pretty much everything financial dropped after Russia heavily shelled a Ukrainian nuclear power plant, threatening a nuclear disaster in Europe "10 times larger than Chernobyl." Bitcoin was below $41,000.
Meanwhile, U.S. inflation was skyrocketing to 7.9% — four times the Fed's general target rate. The European Central Bank (ECB) said it was cutting off the money taps sooner than planned too. But surprisingly, Bitcoin stayed flat.
However, Bitcoin was under attack in Europe, where the European Parliament voted down an attempt to ban BTC and other cryptocurrencies using energy-intensive Proof-of-Work mining — technically requiring them to meet "minimum environmental sustainability standards" — under the forthcoming Markets in Crypto-Assets (MICA) regulations. It wouldn't be the last time that green MEPs would push that.
Fed Chairman Jerome Powell announced a 0.25 percentage point increase in the federal funds rate, leading to predictions that it would end the year between 1.75% and 2% — a pretty substantial lowball of its mid-December 3.83%. Inflation hit a 40-year high, with the Fed predicting it would cool to 4.3% by the end of the year — another lowball for its current 7.7%.
Back in El Salvador, where President Bukele's Bitcoin-as-legal-tender was and is popular with an increasingly tiny percentage of the population, a very silly push by American lawmakers to mandate a study on how the country's Bitcoin Law could impact the American economy led to an equally silly comment from Bukele that the U.S. was "afraid" of the Central American country's Bitcoin experiment.
Despite all of that, Bitcoin was strengthening by the end of the month, cracking $45,000 on March 27 and ending the month in the high $40,000s.
1 April: $46,281.64 30 April: $37,714.88
April started out with a fairly substantial drop from $46,000 down to the $39,000-$40,000 range in the first two weeks, but stayed pretty stable after that before creeping below $38,000 at the end of the month.
Worsening inflation, the war in Ukraine and talk of a steeper-than-expected 0.5 percentage point hike by Fed Chairman Powell all helped keep Bitcoin's head down. And yet, there were still signs of optimism: Morgan Stanley said wholesale banks could thrive when a regulated crypto market that Washington was paying more attention to finally emerged, and Fidelity announced plans to offer Bitcoin inclusion in its 401(k) accounts.
Terraform Labs' LUNA token surged 17% in just 24 hours in mid-April, allowing the peg-stabilizing arbitrage token to help push UST to the third-largest stablecoin, behind USDC and USDT.
Yet there were signs that were, with hindsight, ominous. The non-profit Luna Foundation Guard (LFG) announced that it was building a large warchest of Bitcoin worth billions to support UST's algorithmic peg to the dollar.
Meanwhile, despite dropping interest in El Salvador, a second country adopted Bitcoin as legal tender. But the tiny Central African Republic, in the midst of a long civil war, didn't add much luster. Panama didn't go as far, although it did legalize Bitcoin without adding a capital gains tax. Meanwhile, crypto-savvy Ukraine was getting a lot of support from the industry.
In America, another split was forming. While cities like Fort Worth in Texas were embracing mining, New York began a clampdown — one that would keep on growing — as environmentally unsound.
1 May: $38,469.09 31 May: $31,792.31
May was never going to be great, as Fed Chairman Powell began talking up a rate hike of up to one whole percentage point — far higher than the broad markets had anticipated. And altcoins were in even worse shape than Bitcoin, despite the latter diving 17% in April.
Then the UST algorithmic stablecoin began losing its dollar peg. On May 6 it wobbled, but on May 9 — despite the LFG pouring in billions worth of Bitcoins it had been buying — the stablecoin dropped to 90 cents. LUNA, its partner token in an incentivized arbitrage scheme intended to maintain the peg, also started crashing, down 30% in 24 hours. The next day, terraUSD appeared to be regaining ground, climbing from $0.64 to $0.93.
By May 12, it was all over. LUNA had gone from $87 to under one penny. UST dropped to $0.26, collapsing to $0.02 by the end of the month. Between the two, $48 billion had been wiped out, with the No. 3 stablecoin's market cap having fallen from $18.7 billion to $219 million.
Bitcoin had dropped from $39,000 to $26,000 between May 5 and May 12, although it popped back up again above $31,000 by the end of the month after brushing prices not seen since late 2020. But the wind had gone from sails. By May 13, the Terra blockchain had been halted and exchanges were suspending LUNA.
MicroStrategy, which Bitcoin maximalist Michael Saylor had turned from a business software firm into a Bitcoin owner, was already down $170 million after Q1. But with the bloodbath it swung — briefly — to an actual loss.
Another 0.75 percentage point rate hike by the Fed didn't help, but the real story of Bitcoin's disastrous June is the aftermath of the Terra/LUNA collapse.
It killed a big hedge fund, which in turn killed a half-dozen crypto lenders, taking a whole lot of small investors' crypto with them into bankruptcy. Celsius and Voyager Digital among them.
It also helped cause an even deeper crash in Bitcoin — knocking a third off its price in less than 10 days — and pushing it, briefly, below $20,000. That sent its price back below its 2017 all-time-high — a major bill market that saw the world's first cryptocurrency break into the mainstream consciousness. Things got worse a few days later when the S&P 500 confirmed a bear market on June 14.
Binance CEO Changpeng "CZ" Zhao said that a new all-time high could take two years — putting it in the second half of 2024. Binance is the parent company of CoinMarketCap.
1 July: $19,269.37 31 July: $23,336.90
Despite inflation that kept finding new highs — July's inflation hit 9.1% — and another huge interest rate hike from a Fed determined to break it, July was actually not that bad for Bitcoin, which cracked $24,000 on the 20th.
Overall, July was Bitcoin's best month of the year, ending the month up more than 17%.
Meanwhile, a war of words erupted after Tesla CEO Elon Musk revealed that the electric car maker had offloaded three-quarters of the $1.5 billion in Bitcoin it added to its treasury in early 2021 — and did so at a heavy loss, pulling in just $936 million.
Musk said it was strictly business and that the company was "certainly open" to re-upping its Bitcoin position in the future, but for the time being it needed to strengthen its cash position. He added: "This should not be taken as some verdict on Bitcoin. It's just that we were concerned about overall liquidity for the company given COVID shutdowns in China."
But, he said, Tesla hadn't sold any of his beloved Dogecoin. Saylor called him out on behalf of the Bitcoin maximalists with the undeniable comment: "If you sell 75% of your Bitcoin, you will only have 25% of your Bitcoin left."
1 August: $23,314.20 31 August: $20,049.76
In a year when Bitcoin, miners and the crypto community broadly had been getting more than a little negative press, the world's biggest asset manager, BlackRock, gave its seal of approval to investing in Bitcoin.
And this is why: "Our institutional clients are increasingly interested in gaining exposure to digital asset markets and are focused on how to efficiently manage the operational lifecycle of these assets."
With $10 trillion under management as of January 2022, that's a lot of very, very big investors who are at least interested enough in Bitcoin to convince BlackRock there is money to be made selling it to them.
Meanwhile, the beginning of the month was looking hopeful, with Bitcoin climbing steadily to push past $25,000 on Aug. 15 as inflation came in at 8.3% in the U.S. rather than the 8.7% analysts were expecting — the first pleasant surprise of its kind in quite a while.
Nonetheless, a crypto analyst noted that while the Nasdaq was back to May levels, Bitcoin was still down 20% from that date — and that day proved to be the month's pinnacle as a slide took it down into the $19,000 range by the end of the month.
In the Bitcoin follies department, a doctor specializing in the care of newborns was convicted of paying various "hitmen" a total of more than $60,000 in Bitcoin to damage a colleague's hand and inject his wife with heroin to stop her from divorcing him. Which led a U.S. attorney to generalize crypto as a tool of violent criminals.
Meanwhile Craig "You'd Better Believe I'm Satoshi Nakamoto" Wright found out he was so popular that Hodlnaut — the Twitter critic he was suing for denying that Wright created Bitcoin — received $1.2 million toward his legal defense fund. Despite being awarded just $1.18 in another case against Peter McCormack, Wright said he would continue suing.
Finally, the guy who threw out a hard drive with 8,000 BTC was again denied permission to dig up a Welsh landfill site to get it. This time, he said the city council wouldn't let him do it because it would reveal illegally dumped asbestos — which it denied.
The other big feud was between the Bitcoin Mining Council, which claimed that 59.5% of Bitcoin mining used sustainable energy sources — leading the Cambridge Centre for Alternative Finance to push back. The CCAF put it at 37.6%, with coal as the No. 1 source.
An unexpected cheery note came from Commodity Futures Trading Commission Chairman Rostin Behnam, who said Bitcoin's price could double if properly regulated.
Behnam, who spent most of the year elbowing with Securities and Exchange Commission Chairman Gary Gensler for crypto control when that regulation finally passes, said: "Non-bank institutions thrive on regulation, they thrive on regulatory certainty, they thrive on a level playing field. And they may say otherwise, they might bicker about the type of regulation — but what they love most is regulation because they are the smartest, the fastest and the most well-resourced. With those attributes, they can beat everyone else in the market."
Smackdowns came from the top, with a White House office's report calling for a ban on Bitcoin mining while Canada's Prime Minister Justin Trudeau attacked a pro-Bitcoin conservative challenger with a number of lines including: "Telling people they can opt out of inflation by investing in cryptocurrencies is not responsible leadership."
On the one-year anniversary of El Salvador's Bitcoin-as-legal-tender experiment, it was hard to see anything but failure. The vast majority of the country ranges between uninterested and opposed — despite being the pet project of Latin America's most popular president due to a huge gang crackdown — and well under 2% of remittances were being sent via the country's Chivo wallet. Its plan for $1 billion in Bitcoin bonds remained on ice, and a desperately needed IMF loan was not forthcoming if the law remains on the books.
That said, proponents remain undaunted, with Bitcoin entrepreneur Samson Mow predicting BTC "will be very much ingrained in their society and it'll still be a key component of their economy" in 10 years. And Bukele said: "For those who understand, the real question is not if other countries are going to adopt Bitcoin, but when."
1 October: $19,312.09 31 October: $20,495.77
Billionaire Paul Tudor Jones predicted a recession was coming and that may not be good for Bitcoin (or anything else), but that he still has "a small allocation" of BTC — he'd originally suggested 1%-2% — and predicted Bitcoin and Ether will go much higher. Eventually. An end-of-month rally back above $20,000 raised hopes.
Bloomberg Intelligence's senior commodity strategist, Mike McGlone, said it's just "a matter of time" before Bitcoin begins outperforming most other asset classes. Despite a challenging environment, he said: "It makes sense for one of the best-performing assets of the past decade to drop with the most aggressive Federal Reserve tightening in about 40 years, but rising demand and adoption, declining supply and a steep relative price discount point to risk/reward leaning favorably."
El Salvador's case for Bitcoin as legal tender got no love, with 77% saying they want President Bukele to stop buying it. The government said it couldn't reveal the amount purchased, citing confidentiality. That said, President Bukele's tweets put the number at 2,301 BTC as of September and down $58 million — a 54% loss. Nonetheless, his popularity remains in the mid-to-high 80s.
1 November: $20,485.27 30 November: $17,168.57
The biggest story of the year is the collapse of the world's second-largest cryptocurrency exchange.
It was revealed that Sam Bankman-Fried's empire — FTX and FTX US plus his private trading firm Alameda Research — was hollow. There was an $8 billion hole where the funds entrusted to him by some one million exchange customers should have been.
Quickly the ex-CEO, Bankman-Fried spent the month hiding in The Bahamas and claiming to the New York Times, Good Morning America, and Wall Street Journal that he was an idiot not a crook — an argument based on his claim that he somehow managed not to notice that Alameda was losing billions of dollars. Another string of crypto lenders followed.
On Nov. 5, Bitcoin cracked $21,000 for the first time since mid-September. But on Nov. 6, a run began as FTX customers tried to withdraw their funds.
On Nov. 8, Bitcoin was below $19,000, on Nov. 9 below $16,000.
On Nov. 11, Bankman-Fried declared bankruptcy and resigned, freezing withdrawals. Bitcoin didn't reach $17,000 again until Nov. 30. And 55% of all Bitcoin holders are in the red.
There were some signs of support, notably Fidelity refusing to pull back from adding Bitcoin to its 401(k) offerings, despite some very overt threats from lawmakers.
1 December: $16,967.13 19 December: $16,779.17
Sam Bankman-Fried's apology/denial tour ran on until Dec. 12, when he was arrested in The Bahamas at the U.S. government's request. Long-time crypto-skeptic and gold fan Peter Schiff noted that the arrest, just before Bankman-Fried was set to testify under oath before the House Financial Services Committee, "saving him from himself."
Bitcoin had not reached $17,250 by that date, although it has managed to stay above $16,000.
Standard Chartered, a multinational bank, warned Bitcoin could drop to $5,000 next year as part of its annual list of long shots that it thinks aren't so long they should be ignored. Its global head of research said: "While the Bitcoin sell-off decelerates, the damage has been done. More and more crypto firms and exchanges find themselves with insufficient liquidity, leading to further bankruptcies and a collapse in investor confidence in digital assets."
On the silver lining side, as another round of crypto bankruptcies hit, Goldman Sachs said it "plans to snap up crypto firms at bargain prices."
The bank's head of digital assets, Mathew McDermott, told Reuters that FTX's collapse has showed why crypto needs "more trustworthy, regulated cryptocurrency players." He said: "FTX was a poster child in many parts of the ecosystem. But to reiterate, the underlying technology continues to perform."