The years 2022 and 2023 were full of ups and downs in the crypto world, but will crypto ever recover from it? Due to inflation and the Crash of FTX, we witnessed big changes in the price of BTC, which varied from $15,000 to $45,000.

In fact, the crypto market started crashing at the end of 2022, which is why many investors began to wonder if it could ever recover. On that note, we’ve created a guide in which we’ll discuss the reasons that led to the crypto crash. We’ll also list the factors that could contribute to the cryptocurrency’s recovery.

Learn in This Article

  • Why did crypto crash
  • Will it recover
  • How crypto can recover
  • When crypto will recover
  • How to prepare for crypto recovery

Why Did Crypto Crash?

There are several reasons why the crypto crash happened, such as inflation, chapter 11 bankruptcy filings, and the collapse of FTX.

Inflation

In March 2022, the Federal Reserve started raising interest rates due to inflation. This greatly affected the value of BTC. It came as a surprise to all enthusiasts who believed that cryptocurrencies were immune to inflation, like gold.

On that note, the BTC price dropped from $69,044 in November to $46,696 in December, which is why many investors started selling it. This also led to a drop in the value of altcoins and it marked the beginning of the second crypto winter.

The Crash of TerraUSD and LUNA

Another factor that contributed to the fall of cryptocurrencies was the crash of the stablecoin TerraUSD. Namely, due to the drop in value of BTC and ETH, this stablecoin lost its $1 peg, which led investors to start panic selling their tokens.

The same thing happened to its backing asset LUNA. At the same time, BTC continued its downward trend by dropping to $19,000 in June 2022.

Chapter 11 Bankruptcy Filings

The biggest crisis happened in June 2022 when many well-known crypto exchanges, such as Binance, and cryptocurrency lending companies, like Celsius Network, stopped withdrawals. Due to this, BTC lost 38% of its value. Likewise, many companies went bankrupt, such as Three Arrows Capital, Celsius, and Voyager Digital.

The Crash of FTX

In November 2022, FTX, one of the largest crypto exchanges, went bankrupt. The same thing happened to Genesis Trading and BlockFi. This led to a significant drop in the value of the cryptocurrencies. At the time, the price of BTC stood at $15,000.

Will Crypto Ever Recover?

There are several indicators that in 2024 the crypto market could recover. Namely, the global crypto market reached $2.41 billion in 2023 and analysts expect that between 2024 and 2032 it could experience CAGR growth of 17.10%.

Moreover, since the beginning of 2023, the price of BTC has been on an upward trend. On top of that, the crypto fear and greed index currently has a score of 71. This shows that the crypto market is in greed sentiment, that is, that investors are in a buying mood.

On top of that, due to inflation, many investors began to doubt traditional financial systems, which gives decentralized currencies a certain advantage.

What Factors Will Contribute to Crypto Recovering?

The following factors could contribute to the recovery of the crypto market:

Bitcoin Halving

A Bitcoin halving happens after a certain number of blocks get mined. The last bitcoin halving happened in May 2020, while the next one is expected in April 2024. The purpose of this event is to reduce the number of new coins and increase the value of BTC.

There have been four Bitcoin halvings so far, and the price of BTC has increased after each halving, so we expect the same to happen this year. If the BTC price rises, other altcoins will follow this trend.

The Approval of Bitcoin Spot ETF

The approval of spot Bitcoin ETFs could attract large investors, which would greatly contribute to the recovery of the crypto market. Cryptocurrencies saw a surge in prices after BlackRock filed for a spot Bitcoin ETF. What’s more, spot ETFs could make BTC less volatile as it would reduce the influence of crypto whales.

Tech Developments

In addition to Web 3.0, which could revolutionize the Internet once it launches, other tech developments could also contribute to the growth of the value of cryptocurrencies. For example, the use of AI will improve the security of blockchain and mining. At the same time, layer 3 blockchain scaling solutions will provide enhanced scalability.

There is a high probability that a large number of institutions will turn to blockchain-based solutions this year. We also expect significant advancements in tokenization protocols.

Real-World Use Cases

New crypto projects offer a wide spectrum of real-world use cases. In addition to transactions, blockchain technology can also be used for issuing digital IDs and keeping records about patients. 

Blockchain technology is no stranger to the financial sector either. Namely, large companies like Mastercard and Visa have created crypto credit cards that offer their holders lucrative rewards.

Reduced Interest Rates

As mentioned before, when the Federal Reserve raised interest rates, the crypto market began to lose value. Namely, high interest rates will force many investors to withdraw their investments and switch to more stable assets. This means that reduced interest rates would significantly help the crypto market to recover.

Clear Government Regulations

Clear government regulations will prevent crypto companies from conducting sketchy business. This will contribute to a safer investment environment, which will result in smaller declines in the value of digital assets.

When Will Crypto Go Back Up?

Since digital currencies are highly volatile, we cannot say with precision when the crypto market will recover. However, many analysts believe that the crypto market could recover during 2024 and 2025.

The main reason for this optimism lies in BTC, whose price could reach $60,000 by the end of 2024, which would bring us into a bullish market. There is also a Bitcoin halving that could help BTC reach its new ATH. On top of that, in 2024 and 2025, the Federal Reserve should start cutting its interest rates from 5.25% to 4.5%.

How to Prepare for a Crypto Recovery?

You can prepare for a crypto recovery in the following ways:

Stay Informed

To find out when to hodl and when to scalp, take a look at the current state of the crypto market — follow the price movement of cryptocurrencies with high market caps, like BTC and ETH. Namely, when the major crypto coins experience a price increase, the same happens with smaller altcoins, and vice versa.

Create an Investment Plan

Create an investment plan that will best suit your budget. On that note, allocate your funds to blue-chips and altcoins. As for altcoins, give preference to the ones that have growth potential. You could also invest in DeFi and NTF projects.

Take Advantage of Airdrops

Crypto airdrops will help you accumulate tokens and get ready for the next bullish market. Crypto airdrops are created to promote a specific project by offering free tokens. Besides allowing you to build capital, airdrops will also give you the chance to participate in new projects. 

Conclusion

No market is immune to crashes, including crypto. That said, many factors can lead to a crypto crash, from inflation to panic selling. Moreover, unlike fiat, cryptocurrencies are very volatile. This makes it difficult to determine when exactly the crypto market could recover.

So, will crypto ever recover? there are strong indications that the crypto market could recover this year or next. On that note, the main factors that can lead to crypto market recovery are Bitcoin halving, reduced interest rates, and tech developments. You can prepare for the market recovery by staying informed and creating an investment plan based on your budget.

FAQs

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