5 events that defined the crypto space in 2022

Temitope Akintade
South Africa's Crypto Space in Danger of Crumbling Under Severe Regulations Following Alleged $740M Bitcoin Scam
Bitcoin is the most traded cryptocurrency worldwide

From multi-million dollar hacks to groundbreaking blowups, 2022 was an eventful year in crypto. If you ask an average person to describe how things went this year, there’s a high probability they would say this was the year the technology died. 

Millions of investors/traders who came in drunk on the 2020/21 bull market euphoria vowed to leave the space forever as the hangover (2022 bear market) bit harder. But through all these, the nascent economy survived. 

No denying that our coins tanked in value as the industry suffered over $2 trillion loss of capital, but there were still bits and pieces of events to keep us entertained or at least occupied. Here is a review of the top five trends that defined the crypto ecosystem in a memorable year. 

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Russian-Ukraine war

The Russia-Ukraine conflict significantly impacted global financial markets, not excluding crypto. The market crashed in February when President Vladimir Putin ordered the Russian military to invade Ukraine, but the war became the first that saw crypto take centre stage. 

The Ukrainian government’s official Twitter account posted a tweet requesting Bitcoin and Ethereum donations with two wallet addresses included within days of the invasion. Donations flooded in, and within three days, the government had raised over $30 million worth of BTC, ETH, DOT, and other digital assets.

Crypto’s role in the war showed the power of borderless money like never before. In those times of crisis, ‘internet money’ was a powerful tool for those in need. Ukraine’s request for crypto donations was the first time such would happen in the world, but it is a promise that other countries would adopt crypto in the future. 

The collapse of Terra

Terra was one of the world’s biggest cryptocurrencies by market capitalisation at its peak. The Terra ecosystem was worth more than $40 billion, but the network’s dual token mechanism proved to be its undoing. 

A series of whale-sized selloffs challenged UST’s peg on May 7, raising alarm bells before $UST posted a brief recovery. UST lost its peg again two days later, triggering a full-blown bank run. $UST holders rushed to redeem their tokens against LUNA coins, greatly expanding the supply of LUNA and depreciating the coin’s value, leading even more UST holders to redeem. By May 12, $UST, a supposed stablecoin, was trading for $0.36, while LUNA’s price had crashed to virtually nothing. 

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Terra empire’s collapse caused a market wipeout, but the damage did not stop there. The implosion caused an acute liquidity crisis, hitting major players like Celsius, Three Arrows Capital, Genesis Trading, and Alameda Research. Authorities and lawmakers worldwide censured the risks of stablecoins (especially algorithmic ones) and crypto. 

In retrospect, Terra was arguably DeFi’s biggest failure, and the consequences of that debacle are still unravelling today. 

Fall of major crypto lenders

Terra imploded in May, wiping out billions of dollars in value and drawing the attention of prosecutors globally. But by mid-June, things went south. At this time, the fruits of Do Kwon’s labour started to find their way into centralised and retail markets. 

On June 12, Celsius alerted its customers that it was temporarily, but indefinitely, placing withdrawals on hold. Note that Celsius had invested in Terra, and when the project crashed, it compounded the problems on the ground caused by CEO Alex Mashinsky’s unauthorised trading on the company’s books, as was later revealed. 

Hackers have stolen $1.97bn worth of crypto from January to June 2022

The subsequent major implosion in the crypto lenders market was Three Arrows. Within a few days of Celsius’ announcement, rumours of 3AC’s insolvency began circulating, and its co-founders, Su Zhu and Kyle Davies went silent. They’re now believed to be on the run, owing about $3.5 billion after defaulting on a series of loans. 

The contagion also hit others like Babel Finance, Voyager Digital, and BlockFi. The June liquidity crisis was a reminder of how a single entity’s irregularity could affect others in the crypto industry. 

Ethereum finally ‘Merged’

The space was inundated with bad news in 2022, but Ethereum brought some relief as it started to look like “the Merge” could finally ship around August. Ethereum’s long-awaited Proof-of-Stake upgrade had been in discussion for as long as the blockchain existed, so anticipation was high for the “most important upgrade in the history of the blockchain” in September. 

Hype for the Merge was enough to lift the market out of despair following the June liquidity crisis. ETH soared over 100% from its June’s bottom, raising hopes that the benefits of the Merge (99.95% improved energy efficiency and a 90% slash in ETH emissions) could help crypto flip bullish. 

Eventually, the upgrade shipped without any problems on September 15. However, the Merge was a “sell the news” event, but the Ethereum community was unfazed by weak price action.

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Merge will improve Ethereum’s transaction speed

Compared to an airplane changing its engine mid-flight, the Merge was hailed as crypto’s most significant technological update since Bitcoin’s launch. Ethereum developers were roundly praised for its success. Likely, the real impact of the update will only become apparent over the coming years. 

The FTX debacle 

By the sunset of 2022, the feeling of disaster in the crypto world had become almost normalised. Terra had imploded, many prominent companies announced layoffs while some folded over the summer, and bitcoin and other cryptocurrencies’ market prices continued to dig for crude oil. What worse could still happen? But 2022 saved its most shocking cataclysm for last. 

Barely two months ago, FTX was on top of the world. The Bahamas-based world’s second-largest crypto exchange was known for its juicy 8% APY on stablecoins. However, it came as a bombshell in early November when rumours of illiquidity at FTX’s sister company, Alameda Research, began to surface. 

FTX

That sparked a bank run on the platform, revealing that most of the exchange’s assets were already gone. The story is that FTX ‘lent’ those deposits to Alameda, which had lost billions on poorly-managed, high-risk positions.

FTX eventually filed for bankruptcy, and Sam Bankman-Fried resigned from his position as CEO. He was arrested last Monday in the Bahamas, and there are plans by the United States for extradition. 

Conclusion 

As in bear markets, some of the year’s landmark events were also some of the most devastating. Some might even argue that 2022 was one of crypto’s most catastrophic years. However, 2022 gave us a handful of positive developments. It was one of crypto’s rockiest years, but the industry survived. 

During the 2018 bear market, there was a debate surrounding whether the nascent ecosystem would pull through. Now in 2022, there’s no doubt whatsoever that crypto is here to stay. And not just here to stay, but after this year’s events, the foundations of the industry are now stronger than ever going into 2023. 


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