– 2022 was a difficult year for public crypto firms, with most of them underperforming Bitcoin and recording drawdowns of 90% or more.
– Microstrategy, the company with the largest exposure to BTC, saw a drawdown of 74%.
– Mining companies were especially hard hit, with most of them recording drawdowns of 90% or more and Core Scientific even filing for Chapter 11 bankruptcy.
This year was a challenging one for the public companies in the crypto sector. According to the year-end report from Arcane Research, most of the big players in the market performed poorly over the last twelve months, with drawdowns ranging from 65% to 99%. Bitcoin, the biggest cryptocurrency by market cap, did not escape unscathed either, recording a negative return of around 65%.
The most affected of all the companies seems to have been Core Scientific, a Bitcoin mining firm that suffered a drawdown of 99%. This led to the company filing for Chapter 11 bankruptcy earlier this month. Other mining companies also saw significant losses, with most of them being 90% or more underwater for the period.
The popular crypto exchange Coinbase was also one of the biggest losers, with its market cap dropping by 87%. This led to the firm being valued lower than meme coin Dogecoin. Microstrategy, a company whose stocks‘ main attraction is exposure to BTC through its large reserves, couldn’t perform comparably to the asset and observed a deeper year-to-date drawdown of about 74%.
It is not yet clear why the mining firms have performed so poorly, but some speculate that it could be due to the decrease in cryptocurrency prices, which has resulted in miners having to shut down operations due to the lack of profitability. Another potential factor could be the increase in competition as more miners enter the market and try to outbid each other for rewards.
The performance of public crypto companies in 2022 shows that the sector is still in its infancy and is yet to mature. The crypto market is highly volatile, and investors should be aware of the risks associated with investing in digital assets. As more companies enter the space, the sector will become more competitive and the firms will need to adapt in order to survive and thrive.