Introduction
2022 was a wild year for crypto. Titans collapsed, the market plunged, and even the ‘normies’ were probably aware of the turbulence that went along with crypto’s newfound popularity in 2022.
Things weren’t appearing to be on a downward slope at this time last year. The nascent industry, which began in January 2009 with the birth of bitcoin, hit an all-time high market cap in November 2021 owing to the resurgence of interest in digital assets and the advent of NFTs.
However, a slump seemed imminent, and prices were already falling at the start of the new year against the backdrop of a tightening economy and international turmoil. Bitcoin, the most valuable cryptocurrency by market capitalization, was 30% lower on January 1st than it had been just two months before. The asset has lost approximately 50% of its value from its peak by the end of January.
As it turned out, the real trouble had yet to begin. From the intoxicating highs of the Super Bowl marketing blitz to the shock and fear of the collapse of FTX, let’s look at how 2022 unfolded.
January: Crypto mainstream buzz
Goldman Sachs said BTC could hit $100K as a hypothetical store of value. While Bill Miller, a billionaire investment tycoon, revealed 50% of his net worth was in Bitcoin.
Dogecoin holders were over the moon as Tesla launched DOGE merch payments. Tim Cook, the Apple CEO, showed his interest in the metaverse. The mayor of Rio de Janeiro transfers 1% of the city’s treasury into bitcoin. The AFL and AFLW inked a massive, five-year, $25 million contract with the Crypto.com exchange.
Meanwhile, FTX raised 2 billion dollars in venture funds and got valued at a whopping 32 billion dollars. Four companies—Coinbase, FTX, Crypto.com, and eToro—leveraged the Big Game as a coming-out event, and each aired a dramatic TV commercial during what quickly came to be known as the “Crypto Bowl.” January saw a lot of media attention for cryptocurrencies.
February: Turmoil begins
February started with a lot of great news for the market. VC money was gushing in, Countries were looking to legalize crypto, and companies were filing trademarks for NFTs and crypto.
Luna Foundation Guard (LFG) raised $1 billion to build a reserve for the Terra Luna ecosystem stablecoin UST (what could go possibly wrong?). FTX received another US$400 million in fundraising, while Polygon raised US$450 million.
Reddit founder Alex Ohanian’s crypto-focused venture capital firm raised US$500 million. Immutable and GameStop partnered on a $100 million gaming fund. Meanwhile, MicroStrategy bought 25 million dollars worth of bitcoin for US$37,865 each.
Michael Saylor kept tweeting about Bitcoin. While Ukraine received US$20 million in mere days in cryptocurrency donations, Russia moved to legalize and license cryptocurrency exchanges.
Everything was going fine, then Solana DeFi bridge ‘Wormhole’ cops a US$320M hack. The Crypto market tanked while Solana crashed. Could this be the end, or was this the beginning?
March: More money, More hacks
Luna token moons as Luna Foundation Guard buys BTC worth US$1.3 billion, intending to buy US$10 billion in total. Immutable raised US$200 million at a valuation of $2.5 billion, Helium raised US$200 million, and Bored Ape Creator Yuga Labs raised US$450 million at a valuation of $4 billion.
Optimism, Mina Protocol, LayerZero, Lido Finance, and ConSensys got funded, while several huge crypto venture funds like Haun Ventures, Electric Capital, Bain, and Spartan launched. As a whole, March was one of the busiest months for crypto funding.
MicroStrategy took out a $205 million loan from the Silvergate bank to buy more Bitcoin, while Yuga Labs acquired CryptoPunks and Meebits from Larva Labs. The US government issued an Executive Order on Digital Assets requesting more targeted research.
But then came one of the biggest crypto hacks of all time, the Ronin hack. The side chain bridge, Ronin, of the commercially successful play-to-earn game Axie Infinity is hacked, losing a staggering US$620 million in ETH. More pain was headed the crypto market’s way in the coming months.
April: Calm before the storm
April was a fairly calm month when compared to the subsequent months. Crypto market moved sideways as hopium filled the scene. Do Kwon, the founder of Terra Luna, said that Terra would “buy Bitcoin forever” while MicroStrategy buys another US$190 million worth. The British Treasury Department claimed it intends to turn the UK into a “global crypto hub.”
Gemini predicts that Australia will see a surge in cryptocurrency use in 2022 as Spot Bitcoin and Ethereum ETFs enter the Aussie exchange-traded-fund landscape. Elon Musk bought a stake in Twitter and joined the board, leading to the Dogecoin pump.
NEAR Protocol, a layer-1 blockchain Ethereum competitor, raised $350 million, while USDC stablecoin issuer Circle raised $400 million from BlackRock, Fidelity, and others. As the Central African Republic officially recognized bitcoin as a legal tender, and Finder research forecasts an $80k Bitcoin in 2022, hopium levels balloon.
May: LUNA explosion
Bitcoin slides to a 10-month low as altcoins are in a bloodbath. UST stable coin depegged from US dollar 1:1 correlation as the Terra ecosystem’s collapse begins. The crash resulted in $40 billion in investor losses and has had domino effects throughout the crypto industry.
LUNA was worth $116 in April, and since May, the price had dropped to a small fraction of a penny. Bitcoin plummets from over US$40k at the beginning of the month to about US$24k, making it the second steepest crypto market slump in history. NFT sales volumes nosedive and blue-chips like CryptoPunks and Bored Apes sell for massive losses.
The Luna/UST situation hit market confidence to such an extent that many swore to never invest in crypto again. At this juncture, with so much uncertainty, Cathie Wood’s ARK Invest acquires $3 million worth of Coinbase (COIN) stock, which appears to be an insanely audacious (or just insane?) decision.
June: The blow-ups begin
Illuvium, an Australian-founded Web3 game, sells out its US$75 million virtual land sale amidst one of the year’s most terrifying bear market downturns. With the lowest costs on the market, Canada’s 3iQ introduced two crypto-ETFs on Cboe Australia.
Everything appeared to be going smoothly, but then the Three Arrows Capital (3AC) imploded. Any likelihood of the cryptocurrency market significantly improving in the upcoming months is destroyed by the contagious effects of both this and the Terra Luna disaster. Huge cryptocurrency lending company Celsius appears to be in peril as it stops user withdrawals due to a liquidity crunch. CEL token plummets.
Babel Finance, a crypto financial services company, collapses. It was discovered later that it had lost around US$280 million when trading with customer funds. BlockFi, a different lender, loses hundreds of millions on bad loans to 3AC and other borrowers.
A $250 million loan from SBF’s FTX aids BlockFi. Voyager Digital, another sizable crypto lending company, nearly collapses owing to the 3AC contagion, but fortunately, it receives an emergency US$500 million loan from Alameda Research. Luckily, FTX/Alameda exists in the crypto industry to keep things from getting much worse, right?
The BTC ETF gets rejected by the US Securities and Exchange Commission for Grayscale. Greyscale filed a lawsuit against the SEC on the very same day. The “Responsible Financial Innovation Act,” a 69-page bill drafted by US senators Cynthia Lummis and Kirsten Gillibrand to enact regulations for digital assets conducive to innovation, gets released.
Solana revealed plans for a smartphone, and MicroStrategy continued to buy the Bitcoin dip. Ronaldo and Binance collaborated on NFTs. For the first time, PayPal allowed the transfer of cryptocurrency to third-party wallets.
Nathaniel Chastain, the CEO of NFT platform OpenSea, is accused of insider trading by US prosecutors, and Coinbase lays off 18% of its employees. What bloody month? But the aftershocks of the contagion are far from over.
July: Market on the brink but VC money continues to ooze
Deutsche Bank anticipates US$28k BTC by the end of the year, which delights Bitcoin hodlers everywhere. Gold bug and Bitcoin hater Peter Schiff’s bank gets suspended. Vauld, an Indian cryptocurrency lender, suspends withdrawals. While Voyager files for bankruptcy, one of the leading lending competitors in the region, Nexo, tries to acquire Vauld.
Later, Vauld also declares bankruptcy. Celsius files for Chapter 11 bankruptcy, and Three Arrows Capital also files for bankruptcy. Tesla sells over 75% of its Bitcoin assets for US$936 million, yet the move results in a US$106 million loss.
The lending division of cryptocurrency trading platform Genesis has reportedly lost hundreds of millions of dollars amid the 3AC crisis. Its liabilities are taken up by its parent business, the mammoth Digital Currency Group. Genesis files a US$1.2 billion claim against 3AC. Blockchain.com, a cryptocurrency exchange, loses US$270 million in the cryptocurrency contagion.
Despite all the negative press around cryptocurrency, funding is still coming in. As its valuation rises, influential gaming, NFT, and metaverse company Animoca Brands raises US$75 million, and Multicoin Capital announces the creation of a sizable US$430 million fund. While Multicoin Capital launches a US$430 million venture fund, VC company Variant raises US$450 million for two funds.
The new layer-1 project Aptos, a spin-off of Facebook’s Libra division, raises US$150 million, with FTX Ventures among its leaders. Christie’s, an auction house, announced a Web3 venture fund. While Minecraft declares a ban on NFTs, Russia decides to outlaw cryptocurrency payments. As US inflation hits a 40-year high, the macroeconomic repercussions on the cryptocurrency market become more evident.
August: Crypto still in red
The use of Tornado Cash, an Ethereum-based cryptocurrency mixing service, is sanctioned by the US Treasury. Later, Alexey Pertsev, the creator of Tornado Cash, is taken into custody. The Reserve Bank of Australia promises to evaluate a CBDC’s viability. Advocates of Bitcoin and decentralization view CBDC as an insane notion.
BlackRock joins forces with Coinbase to give its institutional clients access to the cryptocurrency market. More cryptocurrency funding flows in, with companies like a16z, FTX Ventures, Alameda, and Jump Capital becoming quite active, raising $300 million from CoinFund and $200 million from Shima Capital.
The Australian government declared that it would study and audit the cryptocurrency sector as part of a project called “token mapping” before deciding whether or not to regulate it. It has been discovered that Google has so far invested 1.5 billion dollars into crypto companies.
Michael Saylor and MicroStrategy get sued by the Washington, DC, attorney general for tax fraud. BlackRock increases its investment in Bitcoin with the BTC private trust. Skybridge Capital forecasts a $300,000 Bitcoin, while the CEO of JP Morgan anticipates “something worse” than a recession. The US dollar soars, leaving cryptocurrency behind.
Nomad, a cross-chain bridge protocol designed to speed up and simplify transactions across several blockchains, gets exploited for almost US$190 million. Sam Trabucco steps down as Co-CEO of Alameda Research; FTX and Alameda Research unify their venture-investing businesses, and Genesis’ CEO steps down as the company cuts workforce by 20%. Looking back, there was some foreshadowing here.
September: The Merge or The Floppening?
The much-touted “Merge” of Ethereum from the power-guzzling Proof of Work architecture to Proof of Stake is finally done. There is much excitement, but that isn’t mirrored in the price of ETH over the month, which ends up lower than it started.
Many refer to the incident as “The Floppening.” ETH PoW hard fork takes place (for users who still favor the previous consensus algorithm, primarily miners). It trades up and down, mostly the latter.
Nexo, a cryptocurrency lender, was ordered by California and New York to stop offering its yield products. Stanley Druckenmiller, a well-known investor, suggests a “renaissance” in crypto. Pantera Capital intends to raise $1.25 billion.
FTX acquired Voyager Digital for US$111 million. Sui, a subsidiary of Facebook’s Libra project, raises $300m at a $2 billion valuation. FTX, a16z, Jump, Binance, and Coinbase are the funding leaders.
Meanwhile, Wall Street heavyweights Fidelity, Charles Schwab, and Citadel Securities presented the EDXM cryptocurrency exchange. Nasdaq enters the market boldly, announcing plans for cryptocurrency custody and other services.
FTX Ventures acquires 30% of Anthony Scaramucci’s Skybridge Capital. In addition to the resignations of FTX US President Brett Harrison and Celsius CEO Alex Mashinsky, South Korea also filed an arrest warrant for Do Kwon as Interpol intensifies its hunt. A hacker stole US$160 million from the cryptocurrency exchange Wintermute.
October: “Uptober” for hacks?
October began with a market slump. The news that Elon Musk will probably buy Twitter has many people hoping for a relief rally. DOGE sees a rally. CZ, the CEO of Binance, puts $500 million towards Musk’s attempt to acquire the social media company.
Google joins Coinbase for a cryptocurrency payment option. BNY Mellon, the oldest bank in the United States, reveals that it may now hold Bitcoin and Ethereum for a limited number of customers. While Twitter announced the potential to allow buying and selling of NFTs using tweets, Fidelity made ETH trading available for institutional clients.
Additionally, Google Cloud announced the launch of its Ethereum-only blockchain node service. Binance launched a US$500 million fund to provide loans to struggling Bitcoin miners during the bear market, while Uniswap Labs received $165 million in a Series B investment led by Polychain.
The Solana-blockchain-based DeFi protocol Mango Markets exploited for $100 million. The culprit admits guilt but insists his actions weren’t malicious. He consents to repay $67 million. Hack on Binance Smart Chain nets $100 million.
Its blockchain was temporarily frozen to halt further draining. While Cathie Wood predicts a US$1 million Bitcoin in the future, the Aptos layer-1 blockchain crashes upon launch. Gavin Wood, a co-founder of Polkadot, resigns. Dogecoin surges on Musk’s Twitter takeover news. Uptober ultimately ended in the green, albeit with a measly 5.53% gain.
November: The FTX collapse
The first few days of the month were pretty calm and cautious. The news was about Steph Curry, the metaverse, and how MoneyGram’s app supports cryptocurrency. The initial several days went fine overall. Things swiftly got out of hand after several back-and-forth discussions on Twitter between Binance’s CZ, SBF, and Alameda’s CEO Caroline Ellison, in which CZ stoked mounting fears about the stability of FTX (previously reported by CoinDesk).
A day after declaring Chapter 11 bankruptcy, FTX reportedly suffered a hack for hundreds of millions of dollars, presumably from an insider. Later, it was discovered that SBF and several Alameda team members had access to a “back door” in FTX’s internal accounting system that allowed them to use customer funds covertly.
The mainstream media, notably Forbes and the New York Times, were criticized by the cryptocurrency community for their allegedly uncritical coverage of SBF, Caroline Ellison, and the FTX fiasco.
BlockFi, a lender, and Gemini Earn stopped all withdrawals and filed for bankruptcy. Genesis Global Trading’s lending arm also stopped all withdrawals despite having previously claimed everything was alright. Coinbase shares sink to a new low while Cathie Wood’s Ark Invest buys more. These events signal the start of Crypto Contagion 2.0.
Around 30,000 Australians are concerned about whether they will ever see their FTX locked-up cryptocurrency again as ASIC suspends FTX Australia’s license. The massive exchange Kraken lets go 30% of its workers, continuing a trend of layoffs from multiple major cryptocurrency companies in this bear market year (including Coinbase, Galaxy Digital, and Swyftx, among many others).
Tom Brady, Larry David, Steph Curry, and Shaquille O’Neal are the targets of class action lawsuits resulting from their FTX endorsements. The lawsuit’s NYC attorneys claim that FTX was a Ponzi scheme and that the defendants’ acts amounted to fraud against “thousands, if not millions, of consumers nationally.”
As the US Department of Justice starts putting up criminal charges against SBF and FTX, Congress makes the statement that it would convene a hearing on FTX on December 13 to grill SBF and other witnesses.
The lawyer hired to take over FTX and manage its liquidation claims that, despite having managed Enron’s restructuring following its collapse in 2001, he has never encountered a case as complicated as this one.
December: A fitting close to 2022
The US dollar, which has been rising for most of the year, declines in the first few days of the month, giving the stock market some consolation. Leading cryptocurrencies like Bitcoin, Ethereum, and others appear to be consolidating.
The “Bitcoin bottom” argument is getting more heated as a growing number of market observers focus on the market’s charts and forward the theory that the bear market is at its bottom. But the traders’ confidence is clouded by worries about a 2023 recession. According to Bloomberg commodities expert Mike McGlone, Bitcoin could overtake other commodities like Tesla and Gold.
Goldman Sachs is considering investing “tens of millions” of dollars in cryptocurrency companies with on-sale prices. Staking services for Chainlink and ApeCoin go online while Twitter Coin rumors emerge. Animoca Brands invest in the metaverse music company Pixelynx, and Polygon powers Warner Music’s NFT initiative.
SBF gets detained in the Bahamas one day before he was scheduled to testify before Congress (virtually). The FTX founder is held in the medical wing of the notorious Fox Hill prison after his bail got denied. A day later, the SEC accused SBF of misleading cryptocurrency investors.
SBF faces charges of conspiracy to commit wire fraud against clients and lenders, money laundering, securities fraud, commodities fraud, conspiring to defraud the US, and violating US campaign funding laws. SBF and his attorneys intended to oppose the request for his extradition to the US.
He then changed his mind. According to reports, if he is found guilty of all the allegations against him by US federal agencies, he could spend up to 165 years in prison.
Meanwhile, FTX co-founder Gary Wang and former Alameda CEO Caroline Ellison have both admitted guilt to charges of wire fraud. Although they have been cooperative with US government authorities, they may also be facing the prospect of an absurdly long prison sentence.
And just when you believed 2022 could not possibly get much crazier. Donald Trump unveils his eyebrow-raising ($4.45 million) NFT collection, which includes “very fascinating” artworks of him as, among other things, a cowboy, astronaut, superhero, etc. Besides, in an effort to boost its faltering finances in the face of severe sanctions imposed by the West in reaction to the Putin-initiated war in Ukraine, Russia is exploring using Bitcoin and other cryptocurrencies.
December is still not over, but what else could possibly happen? Bitcoin FUD? The collapse of Tether? The implosion of the Digital Currency Group? Guess we’d better avoid tempting fate.
Conclusion
Notably, none of the failures we’ve witnessed this year were brought on by a breakdown in the underlying blockchain technology. In truth, technical advancement in the area has continued, and this year has been a pivotal period for several blockchains. Fraud, theft, reckless lending, and leveraged trading have created a challenging climate for investors.
Many believe it would not have been conceivable with effective government control and regulation. Investors should be mindful that pressure on crypto will continue as we head towards 2023 due to the current macro climate, a lack of regulation and confidence in cryptocurrencies, and unclear legal frameworks.
Although these problems are critical and challenging to resolve, blockchain innovation and advancement are still expanding, and the use cases for the technology are continuing to be adopted.
But bear in mind a recovery could take several months or even years, and the market might even get worse before it rebounds. The repercussions of “crypto winter” may cause more crypto companies affected directly or indirectly to collapse. Several cryptocurrencies may drop to zero or very close to zero.
As a general guideline, only invest what you can afford to lose. While some prices might recover, others might not. If you’ve survived this year well done. It’s been a blood bath.
