2022 is a disastrous year for the crypto industry. This has seen all crypto projects lose value and some companies file for bankruptcy. Here are the key events in the 2022 crypto crash.
Crypto crash in 2022 is huge
The Crypto Crash of 2022 is the biggest ever recorded. It wiped out nearly two-thirds of the total market value. Fortunately, this coincided with a major global financial meltdown, which caused hyperinflation in the UK and US, all countries with risks of recession.
This happened with a major stock market contraction and pullback. So, crypto investors can breathe a sigh of relief knowing that their discovery is not doomed, but part of a larger financial crisis. The crypto market has been reduced to over $2T from the $3T it recorded in November 2021.
Although these events make it seem like the crypto space is angelic in the financial sector this year, that is far from the truth! More rot was discovered this year that caused the meltdown of major crypto empires like Terra Luna Ecosystem and FTX, hurting many investors in the process.
After massive crashes, many lies have emerged in the crypto space in 2022.
Here are some great ones:
The The FTX group collapsed In mid-November, after it was leaked that FTX International Exchange did not have enough funds to match customer deposits 1:1. As a result, people panic and withdraw all their assets at once, triggering a series of catastrophic death spirals.
They withdrew over $5B in one day. The exchange was unable to process transactions due to ‘low liquidity’. Saga took the transaction to its deathbed, and officials had to sell FTT tokens to fund some withdrawals. It also filed for bankruptcy.
However, filing for Chapter 11 bankruptcy made matters worse; All the lies and rot in the exchange were exposed. Major crypto news organizations like Crypto.news looked into the matter and found some interesting lies being made there.
The exchange illegally spent customer funds and made no effort to find alternative funds to cover it in emergencies like the withdrawal requests on November 11 and 12. It was illegally used to finance loans and projects of its founders. , like Bankman-Fried’s Alameda research.
Many lies were also discovered, such as when the exchange would pay its CEO’s parents without doing any work. It also covered over-the-counter (OTC) desks and bogus retailers that it used to swindle its customers’ money. Further rot was revealed when the media learned that the exchange had secured a loan from a major crypto lender, BlackFi, which went bankrupt.
The exchange provided Alameda with a loan that FTX co-founders used to purchase Robinhood shares. These shares were used as collateral for another loan of Blockfi. However, the FTX co-founders never serviced the loan and now want to buy back the Robinhood shares.
During the climax of the exchange, a questionable hack took place. Some experts say the hacker’s extensive efforts to access funds from various holdings, including cold wallets, may have been an inside job. Now, the US DOJ is investigating the hack.
The collapse of Terra Luna
Terra Luna’s ecosystem collapse in May was one of the largest meltdowns of 2022. This ecosystem consisted of an algorithmic stablecoin, UST, and a hyperdeflationary token, Luna. Luna powered the UST and helped maintain its peg.
Ecosystem CEO Do Kwon is the self-proclaimed stablecoin king. Much controversy surrounds the fall of his empire. Some of the untruths that emerged included large corporates like BlackRock buying UST for huge sums. As a result, an even larger amount of Luna was minted to match the stablecoin’s new supply.
Reports claim that DO Kwon received a large amount of Bitcoin in exchange for UST, which was printed without the Terra community’s knowledge. However, Blackrock and other comrades went against the deal and drove UST out en masse. As a result, the supply of UST in the market does not match the total value locked in, causing it to depreciate from the USD.
As the crypto community noticed that a death spiral had been triggered, they started dumping their UST in droves.
As a result, Luna Tokens had to be printed in large quantities to try to protect the USD peg. However, even the LUNA token was dumped and neutralized by its increasing supply. Eventually, both currencies dropped cents from $1 and $95+. When the Terra ecosystem came together, they created the Luna 2 project, leaving the original as Luna Classic (LUNC)
Blackrock vandalism is among some of the lies revealed in Terra Ecosystem Decay. Kwan found out he messed up, cashed his money, and was reported dissolved Just weeks before his South Korean company Terraform Labs eventually collapsed, Terra Ecosystem.
Vandalism and inside jobs will rise
Sabotage and inside jobs are the biggest reasons for the collapse of crypto empires in 2022. The FTX failure can easily be classified under this category as sabotage and internal work played a large role in what happened. Bankman-Fried was one of the contributors to the American Democratic Party. A coincidence? May or may not.
At the time of its collapse, the $400M hack into the FTX ecosystem was orchestrated to the point where it couldn’t go down like any other hack. How can hackers get their hands on an exchange’s cold storage? Also, Alameda Research ‘lost’ crypto wallets came to life shortly after Bankman-Fried’s $250M work was published.
The collapse of Terra is a clear example of sabotage and an inside job. BlackRock and other companies bought massive amounts of UST and stockpiled it, triggering an environmental death spiral and hurting hundreds if not thousands of investors. CEO Do Kwon also blamed it because it was a good idea to accept the ‘offer’ from corporate investors.
Bankruptcies in 2022
FTX Group filed for Chapter 11 bankruptcy In November following its collapse. It reported in its court filings assets ranging from $10B to $50B and liabilities in the same range. The exchange issued a statement that would allow it to kickstart assets to repay customers for Chapter 11 proceedings in the US state of Delaware.
Celsius Network, a Crypto Lender, Was Hit by the Brutal 2022 Crypto Crash It is Filed for Chapter 11 proceedings July in the U.S. District Court for the Southern District of New York. The crypto lender said it only had $167M left in its accounts and froze all customer withdrawals to give it time to raise more funds.
“We have a strong and experienced team to guide Celsius through this process. As we look back on Celsius’ history, I believe we will see this as a defining moment when acting with determination and confidence served the community and strengthened the company’s future.”
Alex Marshinsky, Celsius Network CEO.
Three arrows capital
Crypto hedge fund Three Arrows Capital (3AC) A bankruptcy petition was filed Following a British Virgin Islands court ruling in early July that forced it to liquidate its BVI branch. The company filed for Chapter 15 proceedings in the Southern District of New York.
Huge outstanding debts from BlockFi, Celsius, Voyager Digital, and Babel Finans led to the dissolution of the 3AC BVI branch. Its lenders stopped paying back and required lines of credit, putting the site in a very difficult position.
Crypto lender Blockfi Filed for Chapter 11 bankruptcy proceedings In November, two weeks after FTX collapsed, there were insufficient funds to continue operations and return money to investors.
Crypto Kings will be removed in 2022
Many ‘high net worth’ individuals who ruled the crypto space for years were removed in 2022 following the collapse of their empires. Here are some of them.
Sam Bankman-Fried is one of the biggest crypto games on the ropes in 2022. His FTX empire collapsed because it was built on malicious, financial malfeasance and foul play. Now, he’s facing charges in the United States that could cost him more than a hundred years in prison. He was recently released on $250 million bail. His fate is yet to be known as the case against him is still pending.
Do Kwon The Terraform Labs CEO destroyed his reputation as a major crypto stakeholder earlier in the year following the collapse of the Terra ecosystem. It was leaked that he participated in the collapse of the exchange and that it was sabotage and not an accident. Now, he is on Interpol’s red list and South Korea has issued an arrest warrant for him.
What’s next for crypto?
The crypto space has been rocked by many things in 2022, with massive and repeated crashes and fraudulent activity. However, that’s not all we see from this discovery, as it’s still going strong despite the tribulations.
Now, what dictates the future of the crypto space is how it evolves from this year’s developments. If they take it as a lesson, it will certainly grow, but if it is a death spiral trigger, it will be a wild turn.