- Cryptocurrency prices have had a bad 2022.
- Most coins have shed over 50% of their value this year.
- We explain why crypto prices will recover in the near term.
Crypto prices have plummeted sharply this week. At the time of writing, Bitcoin is trading at $27,918 while Ethereum has crashed to $1,902. At their peak, the two coins were trading at $67,000 and $4,600, respectively. The total market cap of all digital coins has crashed to just $1.2 trillion. So, the most common question among traders is whether crypto prices will recover in 2022.
Crypto price performance in 2022
Cryptocurrencies have not had a good performance in 2022. There are several reasons for this price action.
First, fiscal conditions have changed dramatically in 2022 compared to 2021. As you recall, 2021 started with a fresh $600 stimulus check in the US. After Biden won, he provided another $1,400 stimulus check. Many people, decided to use these funds to buy cryptocurrencies.
Second, inflation has surged hard this year. Data published by the US showed that the headline consumer price index (CPI) rose to 8.3% in April. While this was a drop from the previous 8.5%, it is still close to where it was 40 years. Therefore, many people don’t have the resources to invest in cryptocurrencies.
Third, interest in digital coins has waned. This was shown by the weak performance of Coinbase. The second-biggest cryptocurrency exchange said that it had seen a sharp decline in active users and volume.
Fourth, and most importantly, the Fed has gotten more aggressive this year. Officials have already hiked rates two times and there is a likelihood that they will hike four more times. This new normal has shaken investors.
In total, the market cap of all cryptocurrencies has declined from more than $2.5 trillion when the year started to today’s $1.2 trillion. The meltdown of Terra UST has also contributed.
Will crypto prices recover in 2022?
Looking at charts, the situation looks bad for most coins. For example, the XRP price has fallen by more than 20% in the past 24 hours. Others that have fallen by more than 20% in this period include Cardano, Polkadot, Shiba Inu, and Polkadot among others.
However, it is worth noting that the crypto crash is not a singular event. Indeed, other financial assets have crashed. For example, the tech-heavy Nasdaq 100 has dropped by more than 24% from its highest level this year. Popular stocks like Amazon, Meta Platforms, Teladoc, Apple, and Netflix have all plummeted.
Therefore, this is a sign that the situation is broad. And as such, since bear markets don’t last forever, there is a likelihood that crypto prices will recover in 2022 as investors embrace the new normal.
Read more on the top 20 cryptocurrencies for 2022.
