news segments and their buzzwords dominated 2022: inflation, war, energy, and
currency crises, the FTX meltdown, and one bitcoin now being priced less than
the cost of mining one. With this in mind, let’s briefly examine how crypto and
Forex have bounced off each other in 2022.
domains, the cryptocurrency and Foreign Exchange markets, have grown more and
more intertwined in recent years. Their bond is not trivial: Forex alone has a
daily trading volume of 6.6 trillion USD—with an
absolute worth of 2.41 quadrillion USD.
On the other hand, the still young cryptocurrency market usually has a
daily trading volume of 45 billion USD, of which 95% is comprised of
stablecoins. Stablecoins are digital currencies tethered to conventional fiat
currencies like the USD or the EUR. Hybrid currency trading pairs like BTCUSD (bitcoin and the
U.S. dollar) or ETHUSD (Ethereum and the U.S. dollar) have become extremely
popular on cryptocurrency exchanges and Forex brokerages services alike.
the most recent collapse of the FTX crypto exchange, a profound chain of flaws
has been uncovered, putting many traders and investors either on halt or at
least on high alert.
some mass media outlets play the whole incident off as proof of bitcoin’s and
blockchain technology’s inherent systemic weakness, the causes for this fraud
need to be classified as human malice, greed and maybe some error on the part
of some lower participants.
remember the start of November: the fall of FTX
November 2022, a Coindesk article initiated mainstream interest towards FTX’s
shady financial situation. What eventually unravelled in the days that followed
was a very unsteady, highly suspicious, and most probably fraudulent business
structure that was rotten at the core—with co-founders implicated in the
magnificently huge loss and disappearance of funds.
investigation into the FTX fallout is ongoing, so jumping to conclusions or
final verdicts at this point is premature. But the fact remains that all retail
clients numbering over one million people participating in FTX’s services have
lost their funds. The overall sum is over 1 billion USD—with individual cases
trying to retrieve way over 100,000 USD. Generational family savings and
pension funds have been obliterated.
this writing, around 30 billionaires have claimed to have lost considerate
investments because of it, which makes one wonder who the insiders
were—withdrawing in time—if even billionaires were in the dark about what fate
would soon befall their capital.
whole case and the insights from the ongoing investigations will drag well into
2023, if not further.
USD and 2022’s
FED rate hike marathon
17 March, the U.S. Federal Reserve has been upping the interest rate every 4 to
6 weeks—starting small with just 25 basis points, going from 0.25% to 0.50%.
Throughout the summer and up to November, the rate went to a whopping 4.00%.
The last four rate hikes were each by 75 basis points, showing a very tight and
urgent monetary policy from the FED.
USD did appreciate in the process, but economic growth has been slowing down
because of it, as well. Yet, the internationally common disease of inflation
has not been cured. Although, Europe is struggling from rising prices much more
than the U.S.—especially in the energy sector.
But curbing the pace of price increases had much less success than
bitcoin and the entire crypto market—much like the stock market—have declined
for all of 2022. Almost as if the dynamics of fiat currency inflation and stock
and crypto market depreciation had a stringent correlation to endure.
systemic interdependency of both domains—the Foreign Exchange and the
cryptocurrency market—were at their most intimate in 2022: a historical bear
market run, if there ever was one. The question remains, will a coming bull
market in the world economy make both domains move together, or will one
triumph over the other?
70% since December 2021
world’s first cryptocurrency already began its current course of decline at the
start of December 2021, when it came down to 56,900 USD (from the all-time high
of 67,500 USD on 9 November 2021)—a drop of almost 16%. What followed
afterwards was an often steady, sometimes steep downward trend to 16,840 USD on
30 November 2022—an overall decline of another 70%.
narrative is a sobering wake-up call for the retail and mainstream sentiment
compared to the hysterical and enthusiastic ‘year of the bull’ in 2021. Some
even argue that this is another blow to blockchain’s credibility overall. From
bitcoin’s inception, the chart of asset appreciation is still loud and clear:
BTC remains a historically liable and legitimate long-term hedge against
absolute terms, the USD wins over bitcoin in currency appreciation for this
particular year—despite the inflation frenzy. Experienced Forex traders and
investors took advantage of this now apparent 2022 trend and gave USD the
benefit of the doubt over bitcoin.
same time, let’s keep the most recent Goldman Sachs comments on the U.S.
dollar’s coming peak in mind: their forecasts say that this peak is only a few
quarters away, after which a recession could follow. A significant
re-evaluation of asset values against the U.S. dollar will occur during this
bleak present—finance’s future is bright
stormy waters of present financial and economic crises worldwide will
eventually pass. The cyclical nature of the thing guarantees it. After night
comes a day, and the bull follows the bear. A new synthesis in the world order
will bring a new era of financial opportunities.
such opportunity is the bitcoin halving predicted for April 2024, which experts
believe will give the popular crypto asset a significant drive to growth around
mid-2023. If this turns out to be factual, people will look at the current
period as a ‘buy-the-dip’ time window.
further retrospect, looking at 2022’s hefty bitcoin fluctuations causing damage
even on the state level—like
with El Salvador—high-profile voices have
started to advocate for more regulation rather than direct state opposition.
There is a take among certain expert schools that see the possibility of more
regulation as a constructive trend.
regulation could help dispel investor fear in the future—removing associations
with the tech and blockchain sector as a bursting bubble, and that growth is
also possible based on coming state-organised guarantees and control.
strong indicator is—in great spite of the FTX fallout—that the entire month of
November has seen a tremendous top-up of bitcoin reserves by centralised crypto
exchanges. So the game is far from over—quite the opposite.
OctaFX is a global broker that has been providing online trading
services worldwide since 2011. It offers commission-free access to financial
markets and a variety of services utilised by clients from 150 countries with
more than 12 million trading accounts. Free educational webinars, articles,
analytical and risk management tools the broker provides help traders reach
their investment goals.
The company is involved in a
comprehensive network of charitable and humanitarian initiatives, including
improvement of educational infrastructure, short-notice relief projects,
support for local communities and small to medium enterprises.
On a side note, OctaFX has also won more than 55 awards since its
foundation, including the 2021 ‘Best ECN Broker’ award from World Finance and
the 2022 ‘Best Global Broker Asia’ award from International Business Magazine.