2022 has been a chaotic year for crypto

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The roundup: 2022 has seen a toll in the crypto markets. The year revealed that crypto investors were easily spooked by negative news, triggering bank run-like panic. But as consumers rushed to withdraw their funds, bigger issues began to emerge, such as lack of cash and a complete lack of tangible collateral. Crypto markets now have a long and potentially insurmountable journey to restore investor confidence.

Here we highlight the top five crypto meltdowns of the year.

5. Voyager Digital gets hit over deposit insurance claims.

In July, the crypto broker/lender filed for bankruptcy after one of its clients failed to repay a $650 million loan. That same week, the Federal Deposit Insurance Corporation (FDIC) launched an investigation against the company for allegedly claiming that customer deposits were insured up to $250,000, when they were not. Voyager Digital’s assets were eventually purchased by crypto exchange FTX for $1.42 billion. But after FTX also filed for bankruptcy, Voyager Digital reopened the bidding process for its assets.

4. Celsius deceives its customers.

Also in July, this crypto lender filed for Chapter 11 bankruptcy after freezing customer accounts a month prior due to extreme market conditions. Investigations into Celsius revealed the company was facing a cash crunch, hid huge first-half losses from investors and neglected disclosure laws regarding its financial position. The company also reportedly inflated the value of its CEL digital token to increase its balance sheet holdings. The filing also revealed notes from a meeting of creditors indicating that the company never earned enough revenue to pay the returns its investors were earning, and claims that the returns were being paid with new investor assets.

3. BlockFi has fallen out of favor.

Once valued at $3 billion, the crypto lender has faced its share of troubles in 2022, including a $100 million fine for not registering its crypto interest account, as well as significant losses on loans when crypto hedge fund Three Arrows Capital went bankrupt. The company was bailed out by FTX in a $250 million deal that ultimately fell apart when FTX collapsed. This led BlockFi to suspend customer loans and withdrawals and then file for bankruptcy.

2. Tied with no link to the US dollar.

In May, the world’s largest stablecoin went unpegged to the US dollar and traded at around $0.95 as the contagion hit the crypto markets. The contagion was caused by another stablecoin, TerraUSD, and its algorithmic staking coin called Luna. The values ​​of these currencies fell when another digital currency on its blockchain faced a bank run. Investors quickly demanded almost $3 billion in redemptions from Tether, when TerraUSD was not pegged, and the demands also caused Tether to destabilize from $1. But its short-term cash and reserve support allowed the stablecoin to resist demand and ultimately trickle down to the US dollar.

1. FTX went from being a savior to needing to be saved from itself.

The crypto exchange stepped in to rescue several crypto companies this year, including BlockFi and Voyager Digital, but that all changed when rival exchange Binance sold all FTX FTT digital tokens. This action caused investors to withdraw their FTT tokens en masse and pushed FTX into a liquidity crunch. After being unable to secure a bailout, the company declared bankruptcy and a host of unsavory behavior began to come to light, including the use of customer deposits to support FTX’s sister company, Alameda Research. At the time of writing, the company and its founder, Sam Bankman-Fried, were subject to investigations by the Securities and Exchange Commission and the Department of Justice.

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