All in all, 2022 was a brutal year for digital assets, as rising interest rates and high-profile bankruptcies helped feed a broad and deep selloff in the market.
Here are nine crazy stories that rocked crypto this year:
Cryptocurrency prices plummeted as investors started to fret about rising interest rates.
In 2022, the Federal Reserve aggressively raised interest rates to try to tame soaring inflation, hiking from near-zero in March to around 4.5% nine months later.
When interest rates rise, savings accounts offer higher yields – meaning that holding cash becomes more attractive than investing in assets like stocks, real estate, and cryptocurrencies.
Digital asset prices started tumbling in January, as investors began to worry about the Fed taking a tougher stance on inflation. In that month alone, bitcoin slumped 19% and ethereum tumbled 29%.
“Crypto assets suffered one of their worst years in 2022, as central banks battled soaring inflation, resulting in sharply higher interest rates and weakening growth expectations, all of which left the industry nursing significant losses,” a UBS team of strategists said.
Crypto heavyweights like Coinbase and FTX dominated Super Bowl LVI’s halftime ad slots.
In February, those three companies made a splash advertising on NBC’s broadcast of Super Bowl LVI.
Coinbase’s simple commercial showed a QR code bouncing around a screen for 60 seconds, and a giveaway of $15 worth of bitcoin that sent people swarming to its platform.
Crypto.com collaborated with NBA star LeBron James, while FTX’s “Don’t Be Like Larry/Don’t Miss Out” ad with Hollywood’s Larry David poked fun at crypto skeptics.
But crypto companies cut back on their sports advertising spending as they faced this year’s brutal market selloff — and FTX’s partnerships with the Miami Heat, Mercedes F1, and NFL quarterback Tom Brady all became worthless after it filed for bankruptcy in November.
Stablecoin TerraUSD slipped away from $1 – and its sister token luna crashed to zero.
TerraUSD (UST) was a “stablecoin“, a cryptocurrency whose value was supposed to be fixed at $1.
By pegging value to a stable reserve asset such as gold or a government-issued currency, such tokens offer crypto investors a safer place to park their cash in times of uncertainty.
But on May 7, heavy selling of UST — crypto investors sold around $2 billion worth — broke its dollar peg. Its price suddenly plummeted, and within days it was trading below 10 cents.
Rather than holding dollar reserves, Terra maintained UST’s peg to the dollar via an algorithm. This software propped up the stablecoin’s value by minting and selling small quantities of its sister token luna if UST slipped away from $1.
As UST crashed, the algorithm went into overdrive, minting and flooding the market with luna. It produced so much that luna’s price nosedived from an all-time high of $119.51 to zero in the space of a few days.
The double death spiral resulted in $20.5 billion of realized losses for crypto investors in a single week, according to blockchain research firm Chainalysis.
Celsius Network froze all its customers’ funds – after promising to never act like a bank.
In June, crypto lender Celsius said it would freeze all customer withdrawals, saying it was facing problems caused by “extreme market conditions”.
Bitcoin plunged 15% to below $23,000 after that announcement, while the group’s native token cel dropped by a third to just 21 cents.
Celsius founder Alex Mashinsky had repeatedly told reporters that he hated banks – and yet his company found locked up customers’ funds during a time of high market volatility.
Bitcoin fell under $20,000 to trade below its 2017 all-time high.
In June, bitcoin dropped below $20,000 for the first time since 2020, increasing its losses for the year to over 60%.
Investors see $20,000 as a key psychological level for bitcoin — that is, it signals something meaningful about the leading crypto’s direction.
That’s because the token surged dramatically to about $20,000 in 2017, during that year’s bull market, to set a then-record high. But it then went through a series of crashes in 2018 that pulled its price down to below $4,000.
Bitcoin’s fall weighed on the wider crypto market in 2022. By the end of June, ethereum was hovering just above $1,000. Meanwhile, while altcoins solana and polkadot traded at 90% below the record levels they reached in 2021.
Hedge fund Three Arrows Capital defaulted on a loan and was ordered into liquidation.
Crypto’s hellish June concluded with the bankruptcy of Three Arrows Capital (3AC), a digital asset hedge fund based in the British Virgin Islands.
The crypto firm, known commonly as “3AC”, defaulted on a bitcoin loan from lender Voyager Digital in the middle of the month and was wound up by a court on June 27.
The collapse of Celsius and 3AC wiped a combined $33 billion off the value of crypto markets, according to Chainalysis.
The knock-on effect from their failure spread across the industry. Voyager filed for bankruptcy just weeks later, and trading firm Genesis was left exposed to hundreds of millions of dollars in losses because it had loaned crypto to 3AC.
FTX filed for bankruptcy after a sell-off in its native token triggered a solvency crisis.
In November, CoinDesk reported that FTX’s sister trading firm Alameda Research held a significant amount of its portfolio in the exchange’s native token, FTT.
The price of FTT plummeted from $22 to just $1 in the space of a few days, triggering a solvency crisis at FTX.
The crypto group was forced to file for Chapter 11 bankruptcy on November 17, after its CEO and cofounder Sam Bankman-Fried failed to find a saviour and rival exchange Binance pulled out of a rescue deal.
Documents provided to the Securities and Exchange Commission revealed wild details about FTX’s governance. Its new CEO John Ray III — who oversaw the restructuring of Enron – said he had never seen a company in as bad a shape as FTX in 40 years of dealing with bankruptcies.
Former FTX boss Sam Bankman-Fried was arrested by Bahamian officials on fraud and money-laundering charges.
On December 12, authorities in the Bahamas arrested Bankman-Fried – FTX’s disgraced founder – on a US indictment that charged him with six counts of fraud, money laundering, and violating campaign finance laws.
Bankman-Fried had previously been seen as one of crypto’s most-respected CEOs. He promised to work with regulators, donated millions to president Joe Biden’s election campaign, and was once compared to Luke Skywalker by ‘Big Short’ author Michael Lewis.
His arrest marked the conclusion of a month-long fall from grace that saw the former billionaire’s crypto empire spectacularly implode.
Binance tried to reassure investors of its financial strength – and customers pulled $6 billion out of the exchange.
Its outflows hit $6 billion in the space of 72 hours in December as investors pulled their money from the platform. There were fears the platform could face a liquidity crisis as its native Binance Coin token was selling off steeply.
Binance moved to reassure the doubters by enlisting French accounting firm Mazars to carry out a proof-of-reserve audit for its crypto holdings.
But Mazars has since suspended all of its work with crypto clients, “due to concerns regarding the way these reports are understood by the public,” it said.
Non-fungible token holders are borrowing against their NFT collections at the highest rate ever.
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Data from NFTfi, a DeFi protocol that lets NFT holders list their items as collateral for crypto loans, counted a record 4,399 loans, totaling 18,000 ether tokens, disbursed in January. That’s almost double the previous high of 2,481 loans made in March 2022, per a report from The Defiant.
The spike in borrowing comes amid a months-long collapse in NFT trading volume following the huge enthusiasm in the space seen in 2021 and early 2022, when assets from popular collections like Bored Ape Yacht Club traded at massive premiums.
NFTs can range from digital pictures and art to music, and are purchased using cryptocurrency. While it’s possible to download a file or screenshot an image, purchasing an NFT gives a holder ownership of the item on the blockchain.
Adjusted for market manipulation tactics like wash trading, NFT trading volumes are down about 75% from all-time highs. But considering that the price of ether — the primary crypto used for NFT purchases — has cratered 46% from a year ago, the decline in volumes is less dramatic.
Crypto markets are still recovering from the FTX fallout and the year-long bear market that hit in 2022. However, token prices are on the rise again, with bitcoin up nearly 40% year-to-date.
