With the recent news of FTX bankruptcy, followed by the resignation of one of the top crypto CEOs, there have been signs that 2022 was not the year for the crypto family.
2022 marks one of the unexpected horror for the cryptocurrency business. Bitcoin has plummeted 65% since the beginning of the year, while Luna’s value has collapsed, and crypto giant FTX has declared bankruptcy.
Here are the top cryptocurrencies that went bankrupt or had irrecoverable losses in 2022.
The disintegration of FTX was the worst setback in 2022 thus far. It was valued at $32 billion at the commencement of the year. However, FTX declared bankruptcy in November when a proposed merger with competitor crypto Binance went failed. Customers and other crypto dealers are paying the consequences of FTX Sam Bankman-crypto Fried’s empire crashes.
Terming FUD and ignoring a problematic situation, a person of knowledge in starting of November overlooked signs of collapse at FTX. FUD is a word used in crypto communities to signify irrational fear and confusion. He claims he believed FTX was ‘indestructible”, as it was formerly one of the world’s most respected names in the crypto. FTX owner Sam Bankman-Fried contributed to this misunderstanding by tweeting on November 7th, “FTX is OK.
FTX seemed to be on the verge of collapse in the second week of November. On November 11, it officially filed for bankruptcy in the United States.
BlockFi was the company that declared bankruptcy after FTX for the very first time. It has multiple links to FTX and had relied on a loan worth $400 million to keep afloat after competitor crypto creditors Voyager Digital and Celsius Network declared bankruptcy earlier in 2022.
By restricting withdrawals, this company urged consumers not to make new deposits. Fitch Ratings, one of the nation’s three major credit rating agencies, said the bankruptcy cases, one after another, raise concerns. According to a senior director at the agency, BlockFi’s reorganization highlights “serious” risks of spillover in the “crypto sphere,” as well as probable flaws in how the firm employs strategies to mitigate dangers.
3. THREE ARROWS CAPITAL(3AC)
In March, Three Arrows Capital owned around $10 billion in assets, marking it the world’s most noteworthy fund for crypto hedging. The intelligent person in the room was intended to be 3AC. Three Arrows’ strategy entailed borrowing money from the sectors and then investing it in other crypto ventures, most of which was apparently new. The company had been operational for a decade, which gave Zhu Su and Kyle Davies some reputation in an industry dominated by newcomers.
However, the crypto investment firm 3AC was the first big crypto corporation to declare bankruptcy in 2022, following the May crash of cryptocurrency Luna and TerraUSD. These meltdowns destroyed nearly $42 billion in investor value and prompted an arrest warrant for cryptocurrency creators in South Korea.
The loop of suffering was just getting started. 3AC had a long number of counterparties or corporations whose money was resting on the firm’s capacity to remain useful. With the crypto market dropping more than $1 trillion since April, led by a drop in both bitcoin and Ethereum, speculators with concentrated holdings in businesses like 3AC were taking the brunt of the damage.
Blockchain.com reportedly faced a $270 million hit due to debts to 3AC. Similarly, digital asset exchange Voyager Digital applied for Chapter 11 bankruptcy protection following 3AC was unable to repay the company’s $670 million loan. Losses have also been reported by US-based crypto lenders Genesis and BlockFi, as well as crypto futures platform BitMEX and crypto exchange FTX.
4. VOYAGER DIGITAL
Voyager Digital had 3.5 million customers and $5.9 billion of assets at its peak, which is equivalent to a small regional bank or a decent wealth management business. 97% of Voyager’s clients kept below $10,000 on the site, demonstrating a diverse group of individual investors. It was a crypto lending and trading behemoth, among the few digital asset brokerages registered on stock exchanges throughout the world.
As time passed, the year 2021 was immediately followed by a devastating market meltdown. The bright outlook of Voyager Digital has produced a terrible harvest. After 3AC failed on a loan valued at over $650 million, the lender filed for bankruptcy in July. It sold the assets to FTX for $1.4 billion in September. Following FTX’s demise, the anticipated sale fell down, and the voyager reopened negotiations with other possible purchasers, and from there started a series of collapses for voyager Digital, which ultimately led to its extinction.
5. CELSIUS NETWORK
It started its US bankruptcy lawsuit in July on shakier ground than Voyager. It has been entangled in legal battles over fraud investigations, unequal handling of client accounts, user privacy, and its investment in a new bitcoin mining operation. Celsius Network’s first hint of trouble comes on April 12, 2022, when it announced that its U.S. platform will begin keeping non-accredited investors’ coins in custody, and investors would no more be able to add new assets and receive incentives on Celsius‘ Earn platform.
On May 20, 2022, the Algorithmic stablecoin terraUST (UST) and sibling coin LUNA implode in a $40 billion crash, destabilizing the market and causing $300 billion in losses throughout the economy.
The collapse of LUNA and UST erodes consumer trust in the cryptocurrency market, hastening the start of a “crypto winter” and a sector sell-off that prompts a bank-run-style sequence of withdrawal by Celsius users.
Later, in bankruptcy proceedings, Celsius blames its cash problems on “the domino effect” of LUNA’s demise.
6. LUNA AND TERRA DEMISE
The Terra platform and its founder, Do Kwon, soared to the top of the cryptocurrency market owing to big-name investors, only to collapse in a matter of days in May 2022. The value of the then-$18-billion algorithmic stablecoin terra USD (UST), which is designed to keep a $1 peg, began to sway on May 7 and dropped to 35 cents on May 9. Its partner token, LUNA, which was supposed to steady the price of UST, dropped from $80 to just a few cents by May 12.
The Luna cryptosystem fell in what is thought to be the worst crypto meltdown ever, wiping away an enormous $60 billion and shaking the worldwide cryptocurrency market. When Luna and UST went down, there was a major liquidity crisis in the cryptocurrency market, resulting in an even more devastating loss of value. TerraUSD (commonly known as UST) and Luna were indeed sibling currencies that operate on the same blockchain.
Bitcoin (BTC) fell to new two-year lows in November, while the rest of the market was under a heavy selloff following the fall of exchange FTX. Fears that the FTX collapse would spread unrest in the sector were confirmed in late November after operator BlockFi filed bankruptcy. Since its high in November 2021, the winter for digital currency market has wiped away around $2 trillion in market capitalizations from the larger cryptocurrency market.
FTX is the largest contributor to digital winter.
The failure of the FTX is probably the result of a series of issues that will contribute to 2022’s digital winter. Throughout the year, investors have sold risk assets like stocks due to inflation, increasing interest rates, and economic uncertainty. Following the collapse of the algorithmic stablecoin TerraUSD in May, the sale first highlighted overleveraging in the digital currency lending industry, resulting in the bankruptcy of Celsius and Voyager Digital, along with the demise of Singapore-based hedge fund Three Arrows Capital. According to legal experts, former FTX CEO Bankman-Fried may face years of legal fights, including criminal prosecution and civil action.
The penultimate approach to the virtual world of coins.
FTX, the once-mighty crypto behemoth formed by Sam Bankman-Fried was used to make people aware of the mysterious universe of virtual currencies but declared bankruptcy a little more than three weeks ago. Since then, the crypto sector, Wall Street, and perhaps authorities at federal have been waiting for the next rock to collapse, speculating if the end of digital currency is near or if global financial security seems to be at risk.
Edited by Prakriti Arora