The crypto space had a wild ride in 2022, with giant players collapsing, markets tumbling, and even non-crypto fanboys taking notice of the dramas that played out. Just a year prior, things seemed to be headed upward with no sign of stopping in sight. The industry even reached an all-time high market cap in November 2021, boosted by renewed interest in digital assets and the rise of NFTs.
But the crypto market had no chance against a tightening economy, and prices were already plummeting. Just two months before the start of 2022, bitcoin, the largest cryptocurrency by market capitalization, peaked at US$ 69,000 and marked a new all-time high. And by the end of January, it was trading nearly 50% below its peak.
On hindsight, the trouble was only just beginning. Read on to get to know the 10 biggest moments for crypto in 2022 from the "Crypto Bowl" to the collapse of FTX.
If you follow Twitter or are a football fan, you most likely saw an advertisement for a crypto company at this year's Super Bowl. The 2022 Super Bowl, also known as the "Crypto Bowl", saw a surge in cryptocurrency-related advertisements as four companies – Coinbase, FTX, Crypto.com, and eToro – leveraged the popular event to promote their brands. These companies each aired significant TV commercials during the game, with some ads standing out more than others. For example, FTX collaborated with Larry David in a lighthearted commercial, while Coinbase's bouncing QR code ad went on to win a Grand Prix at the Cannes Film Festival a few months later. The use of the Super Bowl as a marketing platform for crypto companies highlights the growing mainstream acceptance and adoption of cryptocurrency.
Since the invasion of Russia in Ukraine, the country has been facing economic challenges and political instability. In an effort to fund its government operations and rebuild its economy, Ukraine has turned to an unconventional solution: accepting cryptocurrency donations.
This decision was made in recognition of the growing popularity and potential of cryptocurrency as a valid form of payment. By accepting crypto donations, Ukraine is able to tap into a new source of funds and demonstrate its willingness to embrace new technologies. Since Moscow’s invasion, more than 102,000 crypto asset payments worth $54.7 million have been made to the Ukrainian government.
Those hoping for a continuation of the bull market were disappointed by the first of several blow ups that started with TerraUSD (UST). The crypto ecosystem of 2022 suffered a major blow with the downfall of TerraUSD (UST), a stablecoin designed to be pegged to the value of the US dollar. UST was intended to be algorithmically backed by Luna, a separate crypto asset that would offer traders an arbitrage opportunity to maintain the $1 peg.
However, large sell-offs in May 2022 caused Luna to plummet, resulting in a downward spiral that led to the erasure of $45 billion in market cap by the end of the week. The project was effectively dead, with UST trading at less than $0.20 and Luna valued at nearly zero. The impact of this collapse rippled throughout the crypto world, causing further destabilization and uncertainty.
As a company, we were fortunate to not be affected by the LUNA crash at all. While the incident had a significant impact on the crypto space as a whole, our business operations and financial performance remained stable.
As another domino fell in late June, Three Arrows Capital (3AC), a leading crypto hedge fund, went bankrupt, causing ripple effects throughout the crypto ecosystem. 3AC, which borrowed and invested money across the crypto world, lost hundreds of millions of dollars due to the collapse of TerraUSD, as well as being underwater on various other investments.
As 3AC wound down, it took its partners, who it could no longer pay back, with it. One of these partners was crypto lender Voyager, which filed for bankruptcy in early July. In the midst of plummeting crypto prices following the TerraUSD collapse and 3AC's insolvency, crypto lender Celsius also filed for bankruptcy. BlockFi, another lender, managed to avoid the contagion and secured a $250 million line of credit from exchange FTX to remain afloat.
In times like these, a solid business model that is build on trust and transparency is paramount. Transparency is core to our business and how we operate. As a Singapore-based fintech company, we have to ensure clear asset segregation whereby customers’ assets are kept separate from the company’s operating accounts. Simply put, our users have control and authority over their funds.
Despite most ripple effects having subsided by mid-summer, crypto winter was still raging, with prices of crypto assets consistently falling. Bitcoin (BTC) was down 70% from its all-time high, Ether (ETH) was down 75%, and many "alt-coins" were faring even worse.
The NFT market, which had been performing well at the beginning of the year, was also hit hard by the downturn. Monthly trading volume dropped from over $17 billion in January to $1 billion in June, according to blockchain analytics platform Dune Analytics. Interest in both blue-chip and new NFT collections also declined significantly. The belief that NFTs had become mainstream proved to be false.
As the crypto winter continued, macroeconomic challenges, such as Russia's war in Ukraine and interest rate hikes by the Federal Reserve, added to the difficulties faced by crypto companies. These companies were among the first to significantly reduce their workforce.
Coinbase, one of the largest and most well-known cryptocurrency exchanges in the world, laid off 1,100 employees, or 18% of its workforce; NFT marketplace OpenSea laid off 20%; exchange Blockchain.com laid off 25%; and many other firms, from lenders to exchanges to startups, made cuts of various sizes throughout the summer.
Crypto.com, previously known for its heavy marketing spending, reduced its headcount by over 2,000 employees, or between 30% and 40% of its workforce, as reported by Ad Age. The cuts, which were far larger than the company publicly announced, were accompanied by a reduction in Crypto.com's marketing partnerships.
In contrast, we at Cake DeFi see this crypto winter as the time to consolidate, recalibrate and build. Our hiring hasn't slowed down this year, and our team size has nearly doubled to more than 160 people since the beginning of the year.
In mid-September, the final stage of "The Merge" update to the Ethereum blockchain was completed, making the network significantly more energy efficient. This update had been in planning for years, and its successful implementation was a relief to many in the cryptocurrency space. Prior to "The Merge," the lack of sustainability was a common criticism of Ethereum. However, the update not only addressed this issue, but also demonstrated the ability of the Ethereum community to come together and make positive changes to the network. In the midst of turmoil in cryptocurrency markets, this was a welcome development.
Elon Musk's takeover of Twitter has been seen as a positive development for the cryptocurrency market, as many believe that his ownership of the social media platform will result in future integrations with crypto technology and a more accepting attitude towards cryptocurrencies. Musk has a significant presence in the crypto ecosystem and has been known to promote the use of cryptocurrencies like Dogecoin. He has also hinted at the possibility of Twitter using crypto technology in the future, potentially through Dogecoin integration and a focus on crypto payments. These developments could have a positive impact on the adoption and use of cryptocurrencies in the future.
In November, the cryptocurrency industry was shaken by the collapse of FTX, one of its most reputable and mature players. The whole saga began when CoinDesk leaked a balance sheet for Alameda Research, a hedge fund closely tied to FTX and co-founded by its CEO, Sam Bankman-Fried. The balance sheet consisted mainly of FTT, a token created by FTX to give users discounts on its platform. However, the token had poor liquidity, and when Binance was about to dump its large share of FTT, it triggered a run on the token and caused its value to plummet. FTX, which was also a major holder of FTT, announced that Binance would acquire it, but when the deal fell through, no other buyers stepped in and FTX filed for bankruptcy.
Further investigation revealed that Bankman-Fried had used billions in customer deposits, which were supposed to be off-limits to FTX, to make loans to Alameda after it suffered major losses during the summer's market collapses. Other mistakes, such as FTX executives taking loans from Alameda to fund political contributions and Bahamian estates, were also uncovered. The SEC and DOJ launched investigations into FTX, and Bankman-Fried resigned. His replacement, John Ray III, an insolvency expert who oversaw Enron's liquidation, called the situation "a complete failure of corporate controls and such a complete absence of trustworthy financial information." The incident was one of the largest cases of financial fraud in recent history and left the industry reeling.
The collapse of FTX sent shockwaves through the cryptocurrency market and raised concerns about the safety of customer funds at other exchanges. It also highlighted the need for greater regulation and oversight in the industry to prevent similar incidents from occurring in the future. Despite this, the incident also showed the resilience of the cryptocurrency market, as it was able to recover from the shock of FTX's collapse and continue moving forward.
The fallout from the collapse of FTX also spread to other companies and individuals in the cryptocurrency space. Genesis, a digital currency trading firm, was forced to suspend trading on its platform after its parent company, Digital Currency Group, revealed that it had lost millions of dollars in the FTX collapse. BlockFi, a platform that allows users to earn interest on their cryptocurrency holdings, also faced scrutiny after it was revealed that it had significant exposure to the FTT token.
In addition to these companies, the FTX collapse also had implications for high-profile individuals involved in the cryptocurrency market. Tom Brady, the legendary NFL quarterback, faced criticism for his involvement in the token sale of FTT, and Steph Curry, the NBA star, faced backlash for promoting BlockFi on his social media channels.
Overall, the collapse of FTX was a major event in the cryptocurrency industry and had far-reaching consequences for the market. It highlighted the need for greater regulation and oversight in the space and exposed vulnerabilities in the ecosystem. Despite this, the market was able to recover from the shock of the incident and continue moving forward.
As a company, we were fortunate to not be affected by the FTX turmoil. Despite the significant impact that the incident had on the crypto industry, our business operations remained stable. Thanks to our resilience and preparedness, we were able to successfully navigate the situation and emerge unscathed from the FTX turmoil.