Cryptocurrency can be volatile. Since Bitcoin’s first appearance in 2009, cryptocurrency market growth has been phenomenal. Its starting price was around $0.39 for one BTC, and now, in 2022, a single BTC is worth around $41,000. Since the release of Bitcoin in 2009, more than 19 million coins (Bitcoin alone) have been in circulation from over 731,601 mined blocks.
The crypto market is constantly expanding with 100 new tokens are minted every day. To predict where the marketing is going, it’s useful to reflect on previous market trends.
What does the cryptocurrency market look like in 2022, and what are the main drivers of growth? Read on to find out about the recent crypto market trends, the drivers of market growth, and which tokens are currently top of the crypto market.
The backdrop: cryptocurrency trends in 2020 and 2021
2020 was a rollercoaster of a year for the cryptocurrency market value. The overall market by the end of the year was valued at $758 billion. However, this valuation was not without its dips in the road.
The crypto market suffered a collapse on March 8 2020 that resulted in a 24-hour loss of $21 billion in the total crypto market capitalization. On March 11 the WHO declared COVID-19 as a worldwide pandemic—and as a consequence on March 13, the cryptocurrency market lost almost half of its total value. However, in the second half of 2022, the total market value began to rise again. By the end of July, the crypto market value surpassed $300 billion and continued to rise as the year progressed.
Within the last year or so, the cryptocurrency market value has further increased but is still somewhat unpredictable. There was a dip in value at the beginning of this year with a flash crash following the conflict between Russia and Ukraine. However, the crypto market has rebounded, as of March 2022, the crypto market cap was valued at above $2 trillion.
The main drivers of crypto market growth
Various drivers contribute to the success of a token including the production cost, supply and demand, internal management, exchanges, and competition.
Production of cryptocurrency refers to mining. The proof-of-work mining process of cryptocurrency includes calculation-intensive, puzzle-solving computation that requires high processing power. Simply put, mining involves a computer verifying the next block on the blockchain. The decentralized network of miners allows cryptocurrency to function as it does.
In exchange for processing transactions on the blockchain, miners receive tokens as a reward as well as being paid any fees from exchanging parties. Mining can be expensive when you take into consideration the cost of purchasing the right equipment, the electricity it takes to run the equipment, and the time that goes into mining a block.
In the world of production costs, difficulty to mine Bitcoin has been steadily rising. Throw this in with the increasing use of proof-of-stake—and even proof-of-authority—verification methods, and we’ll likely see production costs decrease for many tokens and for the crypto markets overall.
Supply and demand for cryptocurrencies
The relationship between supply and demand is an important measure for any business model, but it’s particularly important for the value of cryptocurrency. When a coin is in short supply or the demand is high the value increases. Alternatively, if a token is in abundance and demand is low then the price will fall.
The cryptocurrency market is volatile and supply and demand is one of the main drivers of this alongside the fact that supply and demand can rapidly change—for instance during the crashes crypto has previously seen in 2020 and 2021. Thankfully, token supply is always known to traders as crypto suppliers share their token minting and burning plans. For example, Ethereum has no cap on supply, whereas Bitcoin has a maximum fixed supply of 21 million Bitcoins.
Indeed, new tokens are minted daily and as cryptocurrency becomes more widely known and adopted demand will very likely follow.
How a coin is managed can affect its value. When ICOs disclose information about their token, it then becomes more desirable to investors. The more information readily available about a token the more attractive it becomes and this contributes to its overall value.
Networks are always adapting to their communities' needs, and some suppliers provide governance tokens for holders to have a say in the future of the project. If there’s a slow process of updating software to improve protocols this can affect a rise in value. Investors usually seek out stable governance, so a network that knows what it’s doing and where they’re going will generally have more value than one that doesn’t.
Additionally, internal management can also include the burning of tokens, sometimes a supplier will burn tokens (remove them from circulation) to reduce the overall supply and increase overall value.
In 2022, there’s a growing collective need for better governance over the crypto market. For instance, countries across the world, like El Salvador have recently introduced favorable cryptocurrency regulations. Regulations like these may well make the crypto market more accessible and, in turn, attract a new pool of users and investors who continue to drive growth.
A token’s accessibility contributes to its value. The more popular tokens like ETH and BTC can be traded on most—if not all—exchanges, whereas smaller lesser-known tokens can be limited to a select few exchanges. The more accessible the token, the more attractive it’ll be for investors.
There are now more exchanges than ever and trading has become more accessible and exchanges are offering more advanced features. The latest generation of exchanges: DEXs (like bitoftrade!) offer users greater anonymity, full custodianship over their funds, and potentially greater security than their CEx counterparts
A major factor in a token’s success is competition—and there are thousands of tokens currently in circulation (around 18,000 in early 2022). Weigh up this steady expansion of the crypto markets with increasingly widespread adoption and healthy competition between tokens is likely to continue over the next 12 months.
Top coins in the crypto market
The crypto market size is constantly evolving and it’s important to keep on top of who are the top movers and shakers. Read on to find out about six of the current key players in the market and find out their cryptocurrency market value.
Six key players in the crypto market in mid 2022
Bitcoin and Ethereum Bitcoin and Ethereum are among the original tokens of the crypto sphere. Bitcoin is the most famous cryptocurrency, arguably because it was first. These tokens have been around a long time and they both have high market caps. Their combined market capitalization is $1.2 trillion at the time of writing.
Even though BTC and ETH have the highest combined market cap, there are newer tokens hot on their heels.
Solana and Binance Coin Solana (SOL) and Binance Coin (BNB) are newer coins on the market but they’ve achieved great things in their short lifetime. Solana is in direct competition with Ethereum—notably thanks to its faster speeds. The platform can support 50,000 transactions per second. Binance Coin was originally minted for discounted trading fees but, since then, its uses have expanded to include payments for transaction fees, online services, travel bookings, and financial services. Both of these tokens launched in 2017 and have rapidly made a name for themselves with a combined market capitalization total of $112 billion.
Tether and US Dollar Coin Tether (USDT) and US Dollar Coin (USDC) are both built on the Bitcoin blockchain as well as the Ethereum and Coinbase blockchains. Tether has been around since 2014, and has managed to stay relevant alongside Bitcoin and Ethereum. On the other hand, US Dollar Coin is a relatively new token that, like SOL, is making its way to the top. Their combined market capitalization is $132 billion.
Curious about what tokens to look out for? Check out our Top 10 Promising Tokens in 2022 article.
Prospects for the cryptocurrency market
The cryptocurrency market is extremely volatile. The value of tokens can grow rapidly overnight without much warning. As you can see from the list above, the age of a token doesn’t necessarily determine its success. While many tokens have been around for a fair few years, it’s refreshing to see newer tokens doing so well in the crypto market and driving innovation.
There’s a lot of potential for investors in the crypto market as it stands. The cryptocurrency market is evolving quickly and it’s not going to stop. Expect to see greater clarity with cryptocurrency compliance, increased blockchain adoption, and more tokens striving to take prime positions in their respective niches.
Cryptocurrency is making a name for itself, but, to keep its value in the future, there needs to be an increase in governance and regulations to make cryptocurrency market prices less volatile. Konzept predicts that by 2030 payment technology adoption will have greatly improved and there will be more than 200m blockchain users. According to Allied Market Research, we can expect to see a growth rate of 12.8% annually up to 2030.
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