The number of dead cryptocurrencies is increasing by more than 220% and will exceed 12,000 by 2022

The cryptocurrency market is not having a good time in 2022.

Since its capitalization reached a record high of US$3 trillion, the price of Bitcoin, the most critical asset, rose to US$69,000 last year.

Due to several factors, the new asset class has retreated from the size it reached in 2021.

These include record global inflation and central bank actions to curb it.

The outbreak of war between Russia and Ukraine, the collapse of projects such as Luna, and bankruptcy filings by companies such as Voyager Digital, Celsius, and Three Arrows Capital did not help either.

While even large companies suffer from the negative impact on the market, some smaller cryptocurrencies may not recover when the “crypto winter” ends.

A study by Nomics on behalf of Bloomberg found that the crypto market will lose more than US$2 trillion by 2022, while the number of “dead” or “zombie” cryptocurrencies stands at 12,100.

About three months before the end of the year, the number is already more than three times higher than the previous year.

The company, which tracks more than 64,400 assets, identified as “zombies” those cryptocurrencies that did not trade for at least one month during the year.

The 2022 result was 227% higher than last year when 3,700 zombie cryptocurrencies were counted.

While “zombie” cryptocurrencies are not fundamentally “dead,” they have very low trading volumes and are at risk of being virtually “abandoned” by crypto investors.

There may be several reasons for this: The project did not deliver what it promised, did not have interesting goals, or was fraudulent.

“The rise in the number of “zombie” cryptos is mainly due to the current macroeconomic situation.

Due to the rather contractionary monetary policy, interest rates have been rising worldwide, and liquidity is getting tighter daily,” he explained.

“In this scenario, projects without fundamentals and with miraculous promises, especially related to the metaverse, can no longer thrive because the risk is no longer worth it for investors,” Josa added.

Since a particular government or country does not own them, cryptocurrencies can be created by any person, project, or company that has knowledge of specific programming languages.

Therefore, companies can also create a kind of bonus or “fun” projects without a specific action plan.

This can contribute to them being abandoned over time.

“Because of this, the projects can no longer reach their potential, and they fail to achieve what was intended in their action plan,” Lucas Josa said.

Moreover, even cryptocurrencies that are not classified as “zombies” by Nomics have low trading volumes.

Of the 64,400 assets, only about 13,800 were traded in 24 hours last week, according to the survey.

“I think crypto projects need to make sure they are as ready for the lows as they are to take advantage of the highs,” Nick Gauthier, co-founder of Nomics, told Bloomberg.

With information from Exame

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