• 28 May, 2024
Market News

What Happened to the Crypto Market in 2022: An Overview

The year 2022 may go down in history as the most turbulent in the history of the crypto market.

Due to major financial issues such as inflation, a weak stock market, and increased interest rates by the Federal Reserve System in the United States, the cryptocurrency market in 2022 has been extremely volatile and unstable.

It was a year of price drops, tighter regulations, on-chain hacks, and bankruptcy. Let’s look at a few major events in 2022, from Terra to the FTX collapse, that had a big impact on how the market looks now.

The collapse of TerraUSD and LUNA

This is where it all began. At the end of 2021, many hailed Terra (LUNA) as one of the hottest crypto projects, owing primarily to its algorithmic stablecoin TerraUSD (UST). However, it did not last long. Terra lost its peg to the US dollar.

The collapse of TerraUSD and its sister coin that backed it resulted in $40 billion in investor losses and has had a domino effect throughout the crypto industry.

Failure of Three Arrows Capital

In March, Three Arrows Capital managed about $10 billion in assets, making it one of the world’s most prominent crypto hedge funds. However, the Singapore-based crypto hedge fund declared bankruptcy in July. Its founders went into hiding after declaring bankruptcy, and their current whereabouts are unknown. Three Arrows Capital employed a daring trading strategy that included attempting to identify favourable light collateralized shareholdings in various cryptocurrencies.

Celsius Network falls

Celsius was considered one of the most successful and large DeFi projects but only until June. People started to withdraw their crypto investments from the Celsius network due to fear of the value of their cryptocurrency crashing and began converting them into cash and other more stable assets.

Celsius Network froze all crypto withdrawals, swaps, and transfers on June 12, citing ‘extreme market conditions.’

In July, the company declared bankruptcy. According to a court filing, the company’s assets dropped by 80% between March 30 and July 14, 2022.

Voyager Digital

Voyager Digital boasted 3.5 million users (roughly what Coinbase boasted in 2015) and $5.9 billion in assets. However, just days after 3AC declared bankruptcy, the cryptocurrency broker declared bankruptcy.

The fall of SBF’s empire – FTX

Just when everyone thought things were looking up in the crypto world, the worst was yet to come. According to a report published on Coindesk in November 2022, crypto exchange FTX is experiencing a severe liquidity crisis and may soon go bankrupt.

After conflating customer funds and investments, the seemingly healthy firm was discovered to be bankrupt. In late November, FTX declared bankruptcy, sending shockwaves through the cryptocurrency market.

The Blockfi Disaster

Two weeks after the collapse of crypto exchange FTX, BlockFi, which provides an exchange and an interest-bearing custodial service for cryptocurrency, filed for Chapter 11 bankruptcy. BlockFi, based in New Jersey, said in its bankruptcy filing that it has over 100,000 creditors, assets, and liabilities ranging from $1 billion to $10 billion. BlockFi also stated that it owes FTX $275 million in loans.

As the year 2022 comes to a close, crypto traders all over the world are living out their worst nightmares, with FTX collapse, tightening restrictions and a decline in the crypto market. However, if we look at the predictions for 2023, experts believe that the crypto market’s past performance indicates that 2023 will be a good year and the bear market will end at the beginning of the year.

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