7 Biggest Crypto Crashes of 2022 the Industry Would Like to Forget

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2022 has been a bumpy year for the cryptocurrency market, with one of the worst bear markets on record and the downfall of some major platforms in the space. The global economy is starting to feel the consequences of the pandemic, and this has clearly had an influence on the crypto industry.

Below is a breakdown of some of the biggest disappointments in the crypto space this year.

Axie Infinitys Ronin Bridge Hacked

In March this year, Ronin, the blockchain network that runs popular non-fungible token (NFT) crypto game Axie Infinity, was hacked for $625 million. The hacker took 173,600 Ether (ETH) and 25.5 million USD (USDC) coins from the Ronin Bridge in two transactions.

When the Lazarus group launched their attack, five of the nine private keys to Ronin Networks’ cross-chain bridge were hacked. With this vote, they authorized two withdrawals totaling $25.5 million in USDC and 173,600 ETH.

According to the Ronin Group, Axie Infinitys’ troubles began in November 2021, when its user base grew to an unsustainable size. As a result, corporate security rules had to be relaxed to meet customer demand. After the initial phase of rapid development was completed, the company reduced its security procedures.

Bridge hacks accounted for 2/3 of the $3 billion that was stolen from DeFi. pic.twitter.com/5IAuTqShMO

Messari (@MessariCrypto) August 30, 2022

The main difficulty was the lack of a properly decentralized network created by game developer Sky Mavis. The hacker acquired access to the private keys of five of Sky Mavis Ronin Chains’ nine validating nodes, allowing them to compromise the network. When the hackers took over five nodes, they essentially controlled more than half of the network and were free to accept or deny whatever transactions they wanted. They obtained ETH and USDC via fake withdrawals.

The crime happened on March 23, but it wasn’t noticed until March 29, when a user reported being unable to withdraw 5,000 ETH from the Ronin Bridge ATM. In the aftermath of the attack, Axie Infinity developers raised $150 million to reimburse affected users.

Collapse of TerraUSD/LUNA

On May 7, when over $2 billion of TerraUSD (UST) was pulled (removed from the peg protocol), hundreds of millions of US dollars were quickly liquidated. It is unclear whether this was a deliberate attack on the Terra blockchain or a response to rising interest rates. Due to the huge cash outflow, the price of UST fell from $1 to $0.91. As a result, market participants started trading $0.90 in UST for $1 in LUNA.

When a considerable amount of UST was withdrawn, the stablecoin exited. The availability of LUNA increased as more people sold their UST during the panic.

After this fall, cryptocurrency markets began to suspend trading pairs such as LUNA and UST. Following the initial accident in May, Do Kwon unveiled a rehabilitation plan for LUNA, and things seemed to be looking up. However, the value of the currencies eventually fell. It was dropped almost as soon as it started. Finally, Terra launched a brand new currency known as LUNA 2.0.

Investors lost a total of $60 billion due to the panic selling that accompanied the decline of TerraUSD Classic (USTC) and Luna Classic (LUC), a related token.

On September 14, a South Korean court issued an arrest warrant for Do Kwon. This happened four months after the collapse of Terraform Labs’ LUNA and UST tokens. Do Kwon and five others were arrested for allegedly violating regional market restrictions.

Three Spire Capital Collapse

When Terra collapsed, crypto hedge fund Three Arrows Capital (3AC), which had a peak market valuation of over $560 million, suffered significantly. 3AC had invested heavily in several struggling cryptocurrency projects, including play-to-earn game Axie Infinity, which lost $625 million to a North Korean hack this year, and the centralized exchange of BlockFi cryptocurrency, which laid off hundreds of employees in mid-June. .

The collapse of the UST shook investor confidence and accelerated the fall in cryptocurrencies, which was already underway amid greater risk flight. A flood of margin calls from 3ACs lenders demanded repayment, but the company lacked the funds to meet the demands. Additionally, many of the company’s counterparties failed to meet the expectations of their investors, many of whom were retail investors promised 20% annual returns.

Related: Santas and Grinches: Heroes and Villains of 2022

The crypto hedge fund ultimately collapsed after taking large directional trades and borrowing from more than 20 institutions, and the founders defaulted on its payments.

Because the founders were not appearing in court, the trial proceeded without them. In a leaked court document filed with the Singapore High Court, the Singapore government was asked to agree to liquidation proceedings and work with liquidators. As liquidators attempt to shut down Three Arrows Capital’s bankrupt crypto business, U.S. Bankruptcy Judge Martin Glenn has issued subpoenas to the company’s founders.

Voyager Digital failed

On July 6, prominent cryptocurrency investment firm Voyager Digital filed for bankruptcy after crypto hedge fund 3AC defaulted on a $650 million loan. 3AC received a large loan from Voyager without collateral. When 3AC defaulted on all of its obligations and its owners left, Voyager lost a significant amount of money to its customers.

Transactions, withdrawals and deposits were all suspended when Voyager announced that 3AC would not repay its loan. In June, Sam Bankman-Fried, billionaire CEO of trading companies FTX and Alameda Research, presented Voyager with a $500 million line of credit to help them ride out the market meltdown.

On July 5, 2022, Voyager Digital Holdings filed for bankruptcy in the Southern District of New York. According to Voyager Digital, the company owes between $1 billion and $10 billion to its more than 100,000 debtors. Despite its debts, however, the company estimates that it has assets worth between $1 billion and $10 billion. They also ensure that enough money is available to repay the company’s unsecured creditors.

In a September court filing, insolvent cryptocurrency broker Voyager Digital revealed that it would auction off its remaining assets.

Click Collect under the illustration at the top of the page or follow this link. Celsius crash and liquidity crisis

Celsius’ value plummeted on July 13, 2022, when one of the leading crypto firms, Celsius Network, filed for bankruptcy. As the price of cryptocurrencies plummeted, investors on the Celsius network began withdrawing their Bitcoin (BTC) holdings in search of safer alternatives.

Consequently, panicked investors left Celsius in volume. Despite saying they were forced to do so due to extreme market conditions, Celsius Network halted BTC withdrawals, exchanges, and transfers on June 12. Site users naturally thought that Celsius had filed for bankruptcy and would not be able to return their money. The value of the Celsius cryptocurrency fell 70% in just a few hours and fell further in the days that followed.

The crypto market saw a major sell-off due to insecurity and falling prices for many major cryptocurrencies, which matched the decline in the price of Celsius. Additionally, due to escalating cash flow issues, Celsius announced 23% layoffs on July 3, 2022. When the time comes, the company filed for bankruptcy on July 13, 2022.

Celsius had total liabilities of $6.6 billion and assets of $3.8 billion, resulting in a $1.2 billion hole in the company’s balance sheet due to the court ruling. .

FTX Collapse

FTX and its US equivalent, FTX.US, filed for Chapter 11 bankruptcy on November 11. The exchanges collapsed due to a lack of liquidity and poor money management, leading to a large number of withdrawals from fearful investors.

Following the bankruptcy announcement, FTX.US briefly restricted withdrawals on Nov. 11, despite earlier promises that FTX.US would not be affected by FTX’s liquidity issues. On the evening of November 11, an alleged hack took over $600 million from FTX wallets. The assault was revealed by FTX in its support channel on the Telegram instant messaging network.

PSA: If you have a bank account linked to FTX US, change your bank account password and stop sharing data immediately.

Below is a screenshot of my bank account, which they tried to access 40 minutes ago pic.twitter.com/sdnaUFEzOW

Mike McGuiness (@mikemcg0) November 12, 2022

According to some Twitter users, hackers were also trying to access bank accounts linked to FTX. Plaid, a company that connects consumer bank accounts to financial apps, responded to public reports by denying FTX access to their products, saying they had no evidence that their tools had been used illegally.

Bankman-Fried was arrested in the Bahamas on December 12 at the request of the US government, which sought his extradition for eight criminal offenses, including electronic fraud and conspiracy to defraud investors. Bankman-Fried was eventually deported to the United States and is awaiting trial after posting $250 million bail.

Bankruptcy of BlockFi

The collapse of FTX earlier this month brought fear and uncertainty to the market. BlockFi, another cryptocurrency exchange, filed for Chapter 11 bankruptcy on November 28. With assets and liabilities ranging from $1 billion to $10 billion, the company had over 100,000 creditors. Additionally, they owed $275,000,000 to Sam Bankman-Frieds’ US subsidiary, FTX US. The app shows that the largest customer has a balance of $28 million.

Following the demise of Three Arrows Capital, several businesses, including the crypto firm that operates an exchange and an interest-bearing custody service for cryptocurrencies, have had serious liquidity problems.

Related:Women who contributed to the crypto industry in 2022

BlockFi agreed earlier this year to accept a credit package from FTX worth up to $400 million to help it overcome a liquidity crunch caused by the exchanges’ exposure to crashing stocks. TerraUSD stablecoins. Due to these concerns, BlockFi was dependent on the performance of the FTX cryptocurrency exchange, which could now jeopardize its financial stability.

While 2022 may have been a tough year for the crypto market, there may be a silver lining. Investor sentiment appears to be improving, and the crypto market has consistently recovered from previous bear markets and platform meltdowns. The events of 2022 could pave the way for new platforms to learn from the mistakes of their predecessors.

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