Bitcoin started to show signs of weakness in November 2021 and the bearish trend continued to move lower well into 2022. This +70% drawdown left its mark on the industry, there’s no doubt about that, even if some people (or companies) managed to take advantage of the elevated price volatility.
Right now Bitcoin is showing some early signs of bottoming, but even if the sentiment is cautiously optimistic, it is too soon to uncork the bottles of champagne. Let’s take a look back and reflect on some of the big winners and losers from this token’s performance in 2022.
The rise of cryptocurrencies, especially Bitcoin, led to the appearance of a group of people highly enthusiastic about the potential of decentralized money. These individuals have been buying and holding BTC tokens, convinced that as it continues to grow in popularity, the price will follow suit.
Looking over the past decade, Bitcoin has had an amazing performance price-wise, according to experts working at UniGlobal Assets, a brokerage that specializes in online trading, but the key has been timing. More specifically, only those who bought cheap and sold at higher levels benefited. People who purchased Bitcoin at higher prices and held on to it are probably very disappointed with their decision right now. This is not to say that in 10 or 15 years, this won’t turn out to be a worthwhile investment, but you must remember that many were certain that BTC would pass the 100K USD mark by the end of 2022 (and that’s probably not going to happen).
However, smart traders who took into account that Bitcoin is still a volatile asset approached things differently. Trading Bitcoin derivatives, like CFDs, was one of the winning tickets, considering that this way it is possible not just to buy and hold, but also to short BTC contracts when the price is falling.
Brokerages such as UniGlobal Assets offer an expanded assets list that includes multiple cryptocurrencies, so even retail traders can engage in this market flexibly nowadays. Costs are also tight, making derivatives trading very attractive in the current market atmosphere.
Crypto exchanges are just intermediaries between buyers and sellers. They generate revenue based on fees/commissions charged on the transactions conducted by their customers. As a result, regardless of whether the market goes up or down, these entities are not vulnerable to price fluctuations.
When Bitcoin, or altcoins, are falling, interest in crypto drops, so exchanges charge commissions on a smaller volume of transactions. Still, it’s possible to continue operating, making exchanges part of the list of winners.
Compared to prior Bitcoin cycles, this time around there has been a greater contribution from the institutional sector. Various crypto funds showed up over the past few years and benefited while the BTC price was on a run higher.
Things turned ugly once the bear market started. Numerous funds were forced to close their doors as their crypto investments posted negative returns. A good example is the crypto hedge fund Three Arrows Capital, which plunged into liquidation at the end of June 2022.
Such companies generally invest large amounts and they don’t have the flexibility to take all the capital out when something bad happens, leaving investors vulnerable to significant losses.