Cryptoassets, like bitcoin, have been present since 2009, but their popularity and significance skyrocketed in 2021.
During the pandemic, many crypto loan and investment options appeared, with some proving to be more promising than others. This year, 2022, has witnessed a series of catastrophes that would restructure and redefine the market in the coming year.
Much of the crypto industry's funk can be traced back to the meltdown of Terra's UST stablecoin and the following market instability, which led to widespread layoffs and other symptoms of an industry in crisis.
Cryptoasset losses impacted both traditional investors and millennials, who comprised the majority of the crypto-investing client base, and many people were turned off by the substantial dangers highlighted by the precipitous decline.
These are the five wildest moments in the industry this year:
The implosion of Terras UST and Luna — and the ensuing crypto turmoil
TerraUSD (UST) was always intended to be worth exactly one dollar, but its price fell below $1 in May. It wasn't the first time a currency was devalued, but it swiftly became the most catastrophic, prompting widespread investor concern.
As an algorithmic stablecoin, UST was not backed by US dollar-denominated assets, but was instead issued and burned by an algorithm using the LUNA bond token, a practice known as seigniorage.
On May 7, almost $2 billion in UST was removed from the Anchor Protocol. On the same day, 85 million UST were sold through a crucial UST liquidity pool on Curve Finance, signaling the start of the stablecoin's depreciation against the US dollar. As a result, more investors sold UST, resulting in more LUNA minting — and an increase in supply of the latter.
When balance was disrupted, the price of LUNA plummeted.
Months later, the crypto industry is still reeling from the fallout.
Su Zhu and Kyle Davies borrowed funds from 3AC to buy a $50 million yacht
Su Zhu and Kyle Davies, co-founders of Three Arrows Capital (3AC), controversially borrowed assets from the crypto hedge fund to put a down payment on a $50 million boat.
Despite the fact that they operated 3AC and were its sole financial decision-makers, using assets from the fund for personal gain is regarded as unacceptable activity that should result in harsh consequences.
A global arrest warrant was issued for Do Kwon — but hes still not caught
Do Kwon, the founder of the defunct stablecoin TerraUSD, was pursued by authorities in his home country for violating capital markets regulations.
Kwon, on the other hand, has been unconcerned by the attempts to locate him, frequently tweeting and even appearing in interviews. In his name, Interpol issued a global arrest warrant, known as a red notice – essentially, a worldwide plea to identify and arrest him. But he's still on the loose.
Kwon has opted to remain anonymous, despite the fact that his South Korean passport has been revoked. According to the most current rumors, he is reportedly in Serbia after traveling from South Korea via Singapore and Dubai.
FTXs “Lehman moment”
A CoinDesk scoop on November 2 triggered a chain of events that concluded in FTX declaring bankruptcy. The study revealed how closely FTX is related to Alameda Research, paving the path for findings about how former CEO Sam Bankman-Fried allegedly engaged in fraudulent actions to prop up the sibling trading firm.
Following a flurry of withdrawal requests on FTX, it became evident that the once-trustworthy exchange required emergency funds to overcome a $8 billion gap.
According to reports, at least a billion dollars in client cash have gone from the exchange. Bankman-Fried himself lost his crypto billionaire status almost overnight, with his net worth plummeting from more than $20 billion to $100,000 as his several interconnected businesses went bankrupt.
According to observers, the saga is comparable to what traditional assets went through during the 2008 financial crisis, which was precipitated by the bankruptcy of Lehman Brothers. Despite the massive impact on financial markets, no one was prosecuted in the case. The FTX case is expected to take a different turn, given two of the key actors have already agreed to plead guilty and face prison time.
FTX execs and Sam Bankman-Frieds parents purchased luxury properties in the Bahamas
According to Reuters, one of FTX's units spent $300 million on houses and holiday sites for its senior executives.
A $16.4 million vacation property was purportedly intended for Bankman-parents, Fried's Stanford University law professors Joseph Bankman and Barbara Fried.
However, in an interview with Andrew Ross Sorkin, the former FTX CEO stated that the property was not intended to be theirs in the long run. According to Reuters, his parents' names appear in paperwork as signatories to the concept, which has yet to be explained.
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