Time flies, as they say, and you may definitely agree. With just a few hours to go, 2022 is about to end. It seemed like yesterday when the year is just starting, and for the market, everything looked so well and thriving. However, as we move forward, many things happened, and agree or not, these are mostly disappointing and disastrous. Sadly, we have seen the collapse of seemingly formidable companies once regarded as institutions in the market. Hacking, fraud, regulation, and bankruptcy resulted in closures and eventually ended their era.
However, when we look back, there are other factors that have contributed to these companies’ losses. Geopolitical tensions such as the Russia and Ukraine war and inflation have contributed to the sharp dive of the world economy. Investors hurriedly pulled out their funds from riskier assets such as cryptocurrencies. Although digital assets are characterized by their volatility, crypto assets have become hypervolatile as a reaction to these unprecedented events.
In this special recap, we will bring you the most significant events in the cryptocurrency market for 2022. In general, 2022 is undeniably a turbulent year not only for the crypto market, but also for the world’s economy as a whole, but there are definitely good things to reminisce about. Travel back with us and together, we will go back in time to the euphoric and disastrous events of the current year. Are you ready to flip the pages of time with us? Let’s go!
- China implemented an extensive ban on crypto activities, including mining
Sadly, the year started with a market crash due to China’s stringent regulations aimed at all cryptocurrency activities in the country. The Chinese authorities have also launched an intensive crackdown against mining companies resulting in the crypto market’s crash. Formerly, this was home to numerous major mining companies. Since 2020, Chinese authorities have shut down mining hubs in the country, which has resulted in a massive exodus of crypto miners to crypto-friendly neighboring countries such as Kazakhstan. As a result, the crypto market’s capitalization plummeted to US$2 trillion from US$3 trillion. Not a good start for the crypto market, but, as always, crypto proponents remain optimistic about the market. Now, let us consider the next one.
- Ukraine passed a regulation legalizing cryptocurrencies
On March 16, President Volodymyr Zelensky signed a law that legalized cryptocurrencies as crypto donations poured in amid its ongoing war against Russia. Countries where cryptocurrencies are legal include El Salvador, Slovenia, Germany, Canada, Malta, The Netherlands, and Singapore to name a few. Ukraine has become the newest inclusion on the list. The country did not only embrace crypto assets but even released an “NFT Museum” to raise more funds. On Oct. 13, the Kharkiv Art Museum NFT Collection and auction launched on the Binance NFT marketplace. The latest adoption has boosted investors’ trust and confidence in the market.
On March 23, the Ronin blockchain network fell victim to a hacking attack. It has been reported that attackers were able to amass more than US$600 million worth of cryptocurrencies after exploiting a security flaw. Allegedly, the notorious North Korean hacking group was responsible for the attack. Although all the affected funds were reimbursed with the help of Binance, the incident resulted in a price crash of AXS (Axie Infinity) and SLP (Smooth Love Potion), the network’s tokens. Once regarded as the top NFT gaming platform because of its play-to-earn model, it has now lost its glory. On September 8, the platform launched “Axie Infinity: Origin” after rebranding it to “Axie Infinity: Origins”. With the latest update, the platform hopes to bring users back. But with the emergence of new gaming platforms, Axie may be up for tough competition.
- Terra Luna’s UST depegging
UST is Terra Luna’s stablecoin. Unlike cryptocurrencies which are volatile, stablecoins offer price stability and are backed by a reserve asset. Even with a price crash, they should maintain their peg to the US dollar. Terra’s stablecoin UST is an algorithmic stablecoin partnered with its sister cryptocurrency LUNA (Terra). In every UST token purchased, an equivalent value of LUNA is also burned. And it is removed from circulation and this maintains the peg. On May 9, the stablecoin deviated from its $1 peg at almost 25%. According to reports, the attackers took advantage of Curve pools’ shallow liquidity backing the stablecoin. Several stories surfaced as to the real reason behind the UST depegging and conspiracy theories were among them. BlackRock, Citadel Securities, and Gemini names were dropped as perpetrators but their alleged participation was no more than hearsay and was never proven. The incident ensued a massive sell-off and the aftermath turned into a huge wave engulfing the industry. Terra Luna’s UST depegging sent a shockwave to the entire crypto market and has fueled the industry’s market cap to fall below US$1 trillion. Terra’s founder Do Kwon is now facing lawsuits but justice seems elusive to the affected users as he has yet to face his charges. His whereabouts are still unknown despite joint efforts made by the authorities.
- Crypto big players face a major liquidity crisis
The collapse of Terra’s ecosystem was just the beginning of more unfortunate events in the industry. On June 12, Celsius announced a temporary suspension of withdrawals for all its users. The company is known to be heavily invested in Terra. Allegation of unauthorized trading also surrounds the company sending a strong alarm about where things are heading. Just a few days after the Celsius announcement, 3AC followed suit. Su Zhu and Kyle Davies, the founders of the company believed to have run away leaving behind billions of dollars in debt as a result of defaulting on a series of loans. Babel Finance, Voyager Digital, and BlockFi were caught up in the contagion.
- Decentralized Tornado Cash platform ban by the U. S. government
An open-source, noncustodial privacy platform that runs directly on the Ethereum network. On August 8, the U.S. Treasury’s Office of Foreign Assets Control announced the platform’s inclusion on its sanctions list. The agency stated that the protocol is being utilized by cybercriminals for money laundering. The action taken by the agency marked the first time an open-source code was sanctioned by authorities and not a specific entity. But this didn’t sit well with the crypto community as it threatens decentralization, the very concept of the industry’s existence. Crypto advocacy Coin Center filed a lawsuit against the government agency. The outcome will determine if the U.S. government has the authority to act against other decentralized projects and will definitely have a huge impact on the entire crypto industry.
- Ethereum’s most anticipated upgrade “The Merge” goes live
Ethereum is the most preferred network for developers as well as investors. Due to its popularity, the network has been plagued with long-standing issues of high gas fees and congestion. Users have been waiting for the upgrade in the network to relieve them of these pains. On Sept. 14, Vitalik Buterin announced the completion of “The Merge” also known as Phase 1 of ETH 2.0, and on Sept. 15, it was finally executed. Now that the Ethereum mainnet and a separate proof-of-stake blockchain known as the Beacon Chain, the network’s energy consumption has been reduced to 99.95%. Good things are yet to come for users and investors of Ethereum as it heads toward ETH 2.0.
- FTX crypto empire crumbles
This is definitely the most shocking story of 2022. FTX Trading Ltd. or FTX was founded by Sam Bankman-Fried in 2019. In just two years’ time, the company became so popular and at its peak in July 2021. Run by a genius, the trading company was the third-largest crypto exchange by trading volume. Endorsements by famous athletes like Tom Brady, Steph Curry, David Ortiz, and Shaquille O’Neal contributed to the surge in its popularity among users. Bankman-Fried was once regarded as a hero and a savior of embattled centralized custodians by lending funds to allow these companies to continue their operations just like in the case of BlockFi and Voyager. Showcasing himself as a humble philanthropist, the young genius became almost everyone’s favorite. But with FTX’s collapse, ugly things came to light involving Alameda Research, a major decentralized finance (DeFi) investor and FTX’s unofficial sister company. Users’ funds were used without their consent. Allegedly, SBF lent US$10 billion to save Alameda which has been losing money due to poor management and high-risk positions. But even that was lost too and with no way to recover the funds, this now leaves a $10 billion hole in FTX’s books.
On Nov. 8, FTX halted withdrawals to its customers and things happen drastically. Before anyone could breathe, the trading platform filed for bankruptcy. SBF resigned from his post as FTX CEO and John J. Ray III replaced him. In his written court testimony, Ray stated:
“Never in my career have I seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here. From compromised systems integrity and faulty regulatory oversight abroad, to the concentration of control in the hands of a very small group of inexperienced, unsophisticated, and potentially compromised individuals, this situation is unprecedented.”
SBF was later arrested and now facing charges of wire fraud, securities fraud, commodities fraud, and money laundering as revealed by prosecutors. He is currently detained in the Bahamas but possibly be extradited to the U.S. to face his charges.
The fall of FTX has shaken once again the crypto industry sending the price of BTC (Bitcoin) to its all-time low below the $16K mark. From US$1 trillion, the industry’s market is now down to less than US$800 billion. Following the implosion of FTX, users withdrew US$1.35 billion from Binance. The largest crypto exchange by trading volume has come under threat with FUD due to rumors which include payout problems, dwindling reserves, investigations by the U.S. Attorney’s Office for money laundering and sanctions violations, and issues about its proof of reserves. With the downfall of FTX and ugly rumors surrounding Binance, a large number of users moved their funds from centralized platforms to decentralized platforms giving rise to DeFi’s popularity.
As we are about to bid goodbye to the gloomy year of 2022, we look forward to 2023 with a positive outlook toward the market. We are all hoping it will be a good year for everyone in the embattled industry. You probably would want what are the things to look forward to in the upcoming year. We wonder too but for now, sit back and relax as we enter a new year that could be full of challenges. Brace yourself for things to come. Always remember to invest in cryptocurrencies what you can afford to lose. Do your due diligence all the time so you will not fall victim to FUD and FOMO to avoid losses.