This year has been challenging for the cryptocurrency market, with a significant bear market and the failure of some major platforms. The global economy is also experiencing the impact of the pandemic, which has affected the crypto industry.
Here are some of the most notable disappointments in the crypto space in 2022:
- Axie Infinity's Ronin Bridge was hacked in March, resulting in the theft of $625 million worth of Ether. The hack occurred when the Lazarus Group gained access credentials to five of the nine private keys for the Ronin Network's cross-chain bridge and authorized two withdrawals totaling $25.5 million USDC and 173,600 ETH. The attack was made possible due to a lack of sufficient decentralization in the network created by game developer Sky Mavis.
- In May, TerraUSD (UST) experienced a sudden outflow of funds, resulting in hundreds of millions of dollars in liquidation. It is unclear whether this was a calculated attack on the Terra blockchain/response to increasing interest rates. The event caused the price of UST to fall from $1 to $0.91, leading to market players trading $0.90 in UST for $1 in LUNA. As a result of the fall, cryptocurrency marketplaces suspended trading pairs such as LUNA and UST. The value of LUNA eventually fell, and the currency was abandoned, leading Terra to launch a new currency called LUNA 2.0. Investors lost a combined $60 billion due to the panic selling that accompanied the decline of TerraUSD Classic (USTC) and Luna Classic (LUNC).
- The crypto hedge fund Three Arrows Capital (3AC) struggled after the collapse of Terra, having invested heavily in troubled cryptocurrency projects such as Axie Infinity and the centralized cryptocurrency exchange BlockFi. 3AC faced margin calls from its lenders but did not have the funds to meet the requests. The company eventually collapsed due to major directional trades and borrowing from over 20 institutions, with the founders defaulting on their payments.
- In July, Voyager Digital filed for bankruptcy after crypto hedge fund 3AC defaulted on a $650 million loan. Trading, withdrawals, and deposits were all suspended when Voyager reported that 3AC would not repay its loan.
- Celsius suffered a liquidity crisis and saw a significant drop in value in July when investors withdrew their Bitcoin holdings in search of safer alternatives. The company halted BTC withdrawals, swaps, and transfers in June, leading users to believe that the company had declared bankruptcy. The value of the Celsius cryptocurrency plummeted by 70% and continued to fall in the following days. The company also announced 23% layoffs in July and filed for bankruptcy in the same month.
- FTX and its U.S. counterpart, FTX.US, filed for Chapter 11 bankruptcy in November due to a lack of liquidity and mismanagement. FTX.US briefly restricted withdrawals on the same day, despite earlier assurances that it would be unaffected by FTX's liquidity issues. The exchange was also allegedly hacked, with more than $600 million being taken from FTX wallets.
- BlockFi filed for Chapter 11 bankruptcy in November, with assets and liabilities ranging from $1 to $10 billion and over 100,000 creditors. The company had a debt of $275,000,000 to FTX US, which could jeopardize its financial stability.
While 2022 may have been a tough year for the crypto market, there may be a silver lining. Investor sentiment seems to be improving, and the crypto market has always recovered from previous bear markets and platform collapses. The events of 2022 could pave the way for new platforms to learn from the mistakes of their predecessors. Despite the challenges the crypto industry faces this year, it remains an exciting and innovative space, with many investors still believing in the potential for significant growth in the future.