According to Statista, the current bear market has caused the number of active tokens to drop by about a thousand, which is the worst annual loss ever recorded for a single year. This phenomenon gives the impression that the world of cryptocurrencies has gone on a major diet. The number of active cryptocurrencies has dropped from an all-time high of 10,397 in 2021 to a (still excessive) level of 9,310 as a result of the reduction. Obviously, there is more to the world of cryptocurrencies than just Ethereum and Bitcoin; nevertheless, this does not imply that every project is deserving of our focus and consideration.
The cryptocurrency market faced a number of challenges throughout the year 2022. In a year marked by a great deal of economic unpredictability, the market as a whole has been jolted to its very foundation as a direct result of the high-profile implosion of FTX (whose parts are still being cleaned up). Fear, uncertainty, and doubt over the space have reached an all-time high as a direct consequence of this. Because of this, the capitalization of the cryptocurrency market dropped by an astounding 72% between its all-time high in November 2021 of $3 trillion and its current value of $850 billion.
It is noteworthy to notice the explosion in the number of tradeable tokens that occurred between November 2021 and January 2022. During this time period, the number of tradeable tokens experienced a surge of approximately 2,400 all the way up to its maximum of 10,397. The bull market intensified optimism, and greed developed during this time as a result. When the grass is green, everyone wants to set up camp. It is not a coincidence that the prices of cryptocurrencies were at an all-time high when a large number of tokens, each with their own “project,” were released into circulation. The decrease in the number of tokens can primarily be attributed to one of two things: either the token project was not able to survive the crypto winter, which followed a marked reduction in investment volume from both users and entities; or it was merely a scam or rug pull coin that never intended to bridge any gaps between today and tomorrow.
Many proponents of cryptocurrencies are quick to draw parallels between the cycles of bitcoin and those of previous high-impact technologies, such as the events that surrounded the dot-com boom. During that time period, unfortunately, the possibility for gains was also responsible for frauds, scams, and economic bubbles. The contention is that this is precisely what is taking place in the cryptocurrency space, where bull markets are luring dishonest participants whose only motivation is to make a profit. On the other hand, the converse is also true: people’s willingness to part with their money decreases during bad markets, which means there is a lower likelihood of these “projects” actually taking off and being successful. The current state of the macroeconomy and the rapidly rising cost of living only serve to amplify this effect. In addition, likely developments in law enforcement’s actions against blockchain-yielding criminals and chain analysis should give bad actors some cause for concern and cause them to lose some sleep.
It is currently unknown whether the future of cryptocurrency will only make room for a select number of cryptocurrencies with a significant influence or will instead create a veritable field. It would appear that a culling is taking place at this time. We can only hope that the blockchain industry is ready for rehabilitation.
