28 December 2022
2022 was a turbulent year for crypto, with highs and lows. The Ethereum Merge was a success, but was overshadowed by the protocols and parties that collapsed one after another. The lowest point was the FTX debacle.
At Amdax, we are not discouraged. The lows of 2022 provide important lessons that form the basis for a better 2023. Let's start with the most important lesson of last year.
The need to store your assets safely became painfully clear last year. Storing your crypto assets on a trading platform is not without risk.
Many people wondered how they could store their assets safely. There are roughly three ways to do this, each with its own advantages and disadvantages.
You can also choose a combination of multiple storage methods. This depends entirely on your personal needs. In any case, it is wise not to store your entire crypto assets in one place.
Losing your assets is never fun, especially not if you lose everything at once. By spreading your assets, you reduce the risk.
As a consumer in the crypto market, it is difficult to assess where the risk lies. You are dealing with new products and services, and they are not always well explained.
If you earn a return on crypto without having to do anything for it, there is also a form of risk. Make sure you know where the return comes from so you can better assess the risk. And if something sounds too good to be true, it usually is.
Several parties, such as Celsius and Anchor Protocol, promised passive income on your crypto assets, with interest rates that rose to 20%. The latter was part of the collapsed Terra Luna ecosystem. And that while you even paid negative interest at banks last year.
These large differences in interest rates did indeed turn out to be too good to be true. Several parties took too much risk with their loans behind the scenes. Those who had lent out their assets, therefore, ran into difficulties.
If you have your crypto assets in staking and are making a return, you probably have not run into difficulties. With crypto staking, your assets are not lent out, but you contribute to the security and reliability of a blockchain network. Be aware that there are also risks associated with this.
Despite all the turmoil in the crypto sector, the decentralized networks continued to run smoothly.
The lesson you can learn from this? Decentralized technology is stable and healthy. In fact, the need for a decentralized network on which you cannot censor and which cannot be endangered by mismanagement was confirmed once again in 2022.
The fact that Bitcoin continues to work and grow as a network is also evident from the increasing adoption. We see higher highs and higher lows in the price development with every cycle. In addition, we see that the adoption of the Bitcoin Lightning Network is increasing and Bitcoin is becoming increasingly popular as a means of payment.
Where the developments around the Bitcoin network continue unabated, we see this in the rest of the crypto sector as well.
And then we are talking about positive developments. It became clear after the fall of FTX that they follow each other at a very high pace. Various exchanges quickly came out with a so-called Proof-of-Reserve system, which shows that customers' assets are actually stored safely within reach.
Proving the ownership of customer assets is not necessarily new. However, this showed that the crypto sector is quick to come up with solutions to problems. Something that is characteristic of the sector: the drive for innovation and improvement.
This has become clear over the past year. Consumer protection needs to be emphasized even more, although this is not as simple as it sounds. The crypto sector is dealing with different jurisdictions. At the same time, you don't want to stifle innovation. Caution is therefore required, and regulation must be drawn up with the right knowledge.
New European regulations are coming with MiCA. An important step, and at Amdax, we are ready for it.
As in previous bear markets, we see that problems and challenges are being solved with innovations. The crypto sector is young but continues to develop. Those who have left now will likely be amazed at all the new developments in a few years' time. At Amdax, we are aware of this and continue to build steadfastly behind the scenes.