The cryptocurrency space suffered a significant pullback in late 2021 that this fledgling market has failed to recover from. Retail investors were clobbered during the 2021 cryptocurrency crash. It also claimed the career and potentially the freedom of Sam Bankman-Fried, the founder and CEO of the cryptocurrency exchange FTX and the associated trading firm Alameda Research. Both filed for chapter 11 bankruptcy in late 2022.
Cryptocurrencies like Bitcoin and Ethereum spent most of 2023 trying and failing to recoup the losses incurred in 2021 and 2022. The market appeared to gain momentum in the summer months, but that has petered out as we have moved into the final months of the year. Is there any reason to bet on crypto in late 2023 as the broader market suffers?
The COVID-19 pandemic triggered a sharp market sell-off that led to further interest rate cuts and aggressive quantitative easing in 2020. That helped U.S. markets snap back into the black, but it also had a very positive impact on the crypto space. The injection of cash and optimism into markets fueled a run for Bitcoin and its peers that allowed it to rail off all-time highs in the spring and autumn of 2021.
Bitcoin and crypto backers pushed digital currencies as an alternative store of value akin to gold since the first big crypto boom in 2017. Cryptos are worth keeping an eye on right now, but poor economic conditions and the liquidity crunch may have a negative impact on the performance of cryptos.
