Crypto investor sentiment saw a slight upswing, but the potential of a deep liquidity crisis in the sector could keep investors at bay.
It's been a near-unprecedented year of extremes and black swan events for the crypto market, and now that 2022 is about to wrap up, analysts are reflecting on the lessons learned and attempting to identify the trends which may point to bullish price action in 2023.
The collapse of Terra Luna, Three Arrows Capital, and FTX created a credit crunch, a severe reduction in capital inflows, and an increased threat that additional major centralized exchanges could collapse.
Despite the severity of the market downturn, a few positives have emerged. Data shows long-term holders and smaller-sized wallets are actively accumulating during this period of low volatility.
Let’s dive in on the positive and negative data points.
Low liquidity and losses abound
When liquidity was flooding into the market in November 2021, Bitcoin price hit an all-time high and investors realized $455 billion in profits. Conversely, as liquidity tightened in what many investors hoped were the darkest days of the bear market, $213 billion in realized losses led to investors giving back 46.8% of the peak bull market profits. The magnitude of the profits versus realized losses is similar to the 2018 bear market, when the ratio retraction from gains hit 47.9%.