The Worst Year For Bitcoin, Ethereum; Is This Beginning of The Fall of Cryptocurrency?

The year 2022 has been the worst year for the CRYPTOCURRENCIES, virtual assets including Bitcoin, Ethereum, and Polygon have seen sharp declines multiple times in the current calendar year. The year also saw the fall of a major cryptocurrency exchange, FTX, due to the liquidity crisis. In India, authorities have also raided cryptocurrency exchanges. Experts said that the fall of cryptocurrencies will continue in 2023 also due to systemic problems in the world of cryptocurrencies.

The main private cryptocurrency, Bitcoin, saw a massive decline of around 65 percent in the current fiscal year to $16,833 on December 23, 2022, compared to around $47,600 at the beginning of the year (January 1). Similarly, Ethereum has also plunged 68.15% year to date to $1,221 on December 23, compared to $3,834 on January 1, 2022.

Polygon or MATIC stood at $2.56 each on January 1, 2022 and has now plummeted to $0.80 on December 23, 2022.

In 2022, all cryptocurrencies experienced high volatility, seeing a 70 to 80 percent swing in their highest and lowest prices during the year.

Vivek Iyer, Partner and Lead (Financial Services Risk) at Grant Thornton Bharat, said: “Calendar year 2022 was probably the worst year ever for cryptocurrencies, due to the implosion of FTX and the massive fall from grace of its founder Sam Bankman. Fried. While the issue may be new to the crypto industry, it is the age-old issue of liquidity risk exacerbating solvency issues.”

He added that the cryptocurrency industry will need to make conscious governance attempts to rebuild the trust deficit caused by the unfortunate set of events.

On the outlook for 2023, Iyer said: “Cryptocurrencies will experience a decline for longer as systemic issues in the crypto world are not fully addressed and may experience an upward trend after 6-8 months from 2023. “.

FTX, which is among the top five cryptocurrency exchanges in the world, has been facing a liquidity crisis and its CEO, Sam Bankman-Fried (also known as SBF), previously told investors that the firm was facing a shortfall of up to $8 billion per withdrawal. requests and needs emergency funds. FTX and its sister trading house Alameda Research went bankrupt last month, winding up a virtual trading business that had at one point been valued by the market at $32 billion. It rocked the world of cryptocurrencies and drastically reduced its prices.

On the tax front, Archit Gupta, founder and CEO of Clear, said: “We can expect more clarity around taxes on gains from the sale of cryptocurrency, more refinement of laws in the future, which will help generate much more clarity in this space”.

In the 2022 Budget, Finance Minister Nirmala Sitharaman introduced Section 115BBH, which places a 30 percent tax (plus applicable surcharge and 4 percent) on profits made from cryptocurrency trading from April 1, 2022. This does not take losses into account. to offset the tax liability.

Although private cryptocurrencies have seen a decline this year, experts say India it has the potential to become a blockchain hub outside of the US market.

Archit Gupta said: “India has the potential to become a blockchain hub outside of the US market. There is a lot of interest and activity around the development of Web3, this will lead to further evolution in this space and the use cases of blockchain technology will grow.”

RBI Governor Shaktikanta Das said on Wednesday that the biggest concern with private cryptocurrencies like Bitcoin and Ethereum is that they have no underlying value and if they are allowed to grow, the next financial crisis will come from them. He said that these assets should be prohibited.

In the past, Das has also hit cryptocurrencies hard. He previously also said that these digital assets can create a lot of financial instability in terms of the central bank’s ability to determine monetary policy.

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