This year hasn’t been great for the nascent cryptocurrency market. The first six months of 2022 saw a decline in the price of every major crypto and a 26% reduction in venture capital investment. Data from Crunchbase shows that investment in cryptocurrency companies was down to $9.3 billion in the first half of 2022 compared to $12.5 billion in the first half of 2021.
In mid-June, the rug was pulled out from under crypto investors after prices dropped significantly, with Bitcoin falling by as much as 37.3% to trade below $19,000. By the time the dust had settled, the cryptocurrency market had lost a whopping $2 trillion in value. Major cryptos such as Bitcoin and Ethereum had lost over one-half of their value while more than 70 cryptos were down by approximately 90%.
Even though the crypto market has been down for the past couple of months after losing trillions of dollars in market cap, cryptocurrencies are not down for the count. Digital tokens are poised for a recovery that could see the crypto market bounce back and regain their value in the coming months.
One major reason for this recovery is the increasing usefulness of cryptocurrencies. Thanks to the underlying blockchain technology that powers cryptos, digital tokens offer benefits such as increased privacy, security and decentralization. Companies in the crypto space are keen on offering financial services that are more effective and transparent with real-world benefits such as instant settlements, affordable remittances and efficient cross-border payments.
Even while crypto prices were falling, companies across different industries were looking for ways to leverage blockchain and cryptos in their infrastructure. With crypto companies hoping to solve some of the problems of modern banking using decentralized digital tokens, there is a good chance blockchain technology will see increased adoption.
Blockchain may also enjoy long-term longevity due to attention from institutional investors. Crypto exchange Coinbase recently partnered with mammoth investment management company BlackRock to increase access to crypto trading and custody services among institutional investors. Additionally, a recent report revealed that BH Digital, a Brevan Howard Asset Management subsidiary, had raised funding worth $1 billion.
Another partnership between Fidelity Digital Assets, Citadel Securities and Charles Schwab that resulted in the launch of a cryptocurrency exchange called EDX Markets also demonstrates the faith institutional investors have in blockchain technology.
Regulators and lawmakers are also working to regulate blockchain technology and cryptos rather than ban the disruptive technology. In the European Union, landmark legislation titled Markets in Crypto Asset (MiCA) has positioned the regional bloc as one of the most thoughtful and robust cryptocurrency regulators in the world.
More countries are opting to regulate cryptos, implementing regulations to keep investors sage while ensuring that the market remains fertile for innovation.
Combined, all of these factors show that while the crypto market may have stumbled, blockchain technology has barely begun its run. Companies such as HIVE Blockchain Technologies Ltd. (NASDAQ: HIVE) (TSX.V: HIVE) are also counting on this anticipated industry growth to scale their operations too.
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