The Year in Crypto 2022: The ups and downs of crypto last year

2022 has been a tumultuous year for investors, with the U.S.
stock market suffering a substantial decline and bonds and cryptocurrencies
both crashing over 50% from their respective peaks in 2021. Uncertainty is high
across global markets, presenting unique challenges to those navigating these
choppy waters.

In the crypto sphere, a number of leading firms suffered
major financial losses while plummeting prices rocked digital currency markets
across the globe.

After multiple years of warning about the pitfalls of
cryptocurrency, 2022 saw a string of events that supported many warnings. In
May, we witnessed an ecosystem collapse on , followed by the FTX
the exchange’s disastrous November outcome – followed by optimism in the crypto
industry: Ethereum merge!

So the end-of-year holiday season is an opportunity to take
stock after one of the most challenging years in recent memory and look ahead
toward brighter days on the horizon.

1. Terra LUNA Crash

Terraform Labs, was founded in 2018 and headquartered in South
Korea’s capital Seoul, made headlines when it launched the innovative system alongside its companion stablecoin UST. Their concept
of an ‘algorithmic stablecoin’ was unique compared to other existing coins,
such as and , with LUNA burning whenever UST loses
its 1:1 peg against the dollar or vice versa. CEO Do Kwon inspired this
revolutionary invention which has been making waves ever since.

But mystery surrounded the Terra Network in May 2022 when
its price suddenly plummeted. Big-shot investors had driven the algorithmic
stablecoin, which was worth $18 billion at its peak, to the highest tier of
crypto success. Yet within a few days on May 7th and 9th, Terra USD fell from
its peg of one dollar down to 35 cents while LUNA dropped all the way from an
impressive figure of almost 80 dollars to just a few pennies by the 12th.

This tragedy left many scratching as they tried to determine
how the millions of dollars of investors’ savings evaporated in no time. Before
the LUNA crash, immense sums of UST were withdrawn from Anchor Protocol and
sold off in short order. The precise reason for this activity is yet unclear. However,
some observers believe it may have been a purposeful strike against Terra’s
ecosystem.

This blackout sale caused an abrupt decrease in price per
unit coin, plummeting to just 91 cents USD. Taking advantage of these
conditions, shrewd investors began purchasing large amounts of LUNA at hugely
discounted prices before its value had time to recover.

As the cryptocurrency marketplace faced a
significant decline, LUNA was not spared as its price plummeted. This posed
further turmoil with UST, which had been algorithmically tied to LUNA for
stabilization. Ultimately, when UST’s total value could no longer be redeemed
against LUNA due to market capitalization dipping, holders rapidly lost
confidence in it. They began selling off, causing an accelerated devaluation of
both currencies.

2. Musk Buys Twitter

After prolonged legal proceedings, difficult decisions, and
tumultuous transition periods, the serial entrepreneur finally achieved their
ultimate goal – acquiring the social media platform. The past months have seen
a whirlwind of events since Elon Musk assumed ownership of Twitter: Employees were
laid off en masse, and engineers were fired for criticism, leading to the
company’s stock plummeting. It marks a period unlike any other in Twitter
history, following Musk’s initial proposal earlier this year to take control of
the platform.

On Apr 5th, Elon Musk publicly revealed his acquisition of a
substantial portion of Twitter shares. Though initially offered to join the
Board, this offer was quickly retracted to fend off a “hostile takeover” by
Musk. Subsequently, Mr. Musk proposed the purchase of Twitter for $44 billion –
which was above its current market price at that time – expressing interest in
utilizing principles surrounding free speech as he believed it had been wrongly
managed thus far.

Later on, Elon Musk announced plans to finance a deal
through cash and loan acquisition, causing shares in his automotive business
Tesla to plummet by the middle of November. Subsequently losing almost half
their value, these downward trends have raised serious questions among
investors and those involved with the company.

It was followed by Elon Musk’s claims of Twitter covering up
a profusion of bot and spam accounts garnered no response or reprieve. As a
result, Twitter pursued legal action against tech mogul Elon Musk in a Delaware
court, seeking to enforce its $44 billion offer.

After Elon Musk completed the contentious
acquisition of Twitter, and swiftly took control with a dramatic change in
management. Executives have been removed from their positions as he steers the
business toward his vision for success.

3. Ethereum Merges

is making a groundbreaking transition from
mining-based proof-of-work to a more efficient, scalable proof-of-stake (PoS)
system. The Merge will enable integration between Ethereum’s mainnet and its
Beacon Chain – an energy-conscious PoS Layer that facilitates this significant
updating of the blockchain consensus mechanism.

Ethereum powers the development of innovative dApps and
crypto assets, allowing blockchain developers to unleash their creativity.
Boasting the second-highest market cap in its industry, Ethereum is a mainstay
of technological progress in the cryptocurrency world.

Before the Merge, Ethereum’s blockchain was safeguarded with
an energy-intensive Proof of Work system. Here miners would race against one
another to solve a challenging mathematical equation in order to verify and add
transactions sent over the network – their reward being a cryptocurrency
incentives.

After Ethereum’s successful Merge, network miners will be
replaced by stakers who secure their ETH tokens to authorize transactions. As a
result of this major upgrade, it is anticipated that the energy consumption on
the blockchain system will reduce significantly by more than 99.5%.

Furthermore, The Merge paves an exciting path for further
the improvement in scalability can now be achieved with the Proof-of-Stake
consensus model, and various other advancements, such as sharding, could be
possible soon. It would significantly accelerate transaction speed while
managing heavy congestion efficiently at the same time.

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4. End of Tornado Cash

On Aug 8th, a significant milestone was reached in the fight
against cybercrime when U.S Treasury-sanctioned Ethereum smart contract mixer
Tornado Cash faced repercussions for its involvement in laundering over $455
million worth of cryptocurrency obtained by North Korean-affiliated hacking
organization Lazarus Group.

Since its launch in August 2019, Tornado Cash has mixed an
impressive $7.6 billion worth of Ether transactions; however, a significant
portion (30%) is tied to potentially illicit actors. Complicating the matter
even further is the non-custodial nature and smart contract encoding of this
decentralized platform which makes traditional sanctions compliance difficult. Cryptocurrencies and other blockchain assets were regularised worldwide.

Tornado Cash is a practical and legitimate solution for
users who wish to preserve financial privacy, such as donors giving money
towards political causes or keeping information about their wealth private.
However, it has also gained appeal among cybercriminals seeking ways of
laundering illicit funds.

This was evidenced in the Treasury Department’s announcement
regarding sanctions against Tornado Cash due to its role in facilitating over
$455 million worth of cryptocurrency is being laundered by North Korea-affiliated
hacking organization Lazarus Group from Axie Infinity’s Ronin Bridge protocol,
as well as stolen funds received via Harmony Bridge and Nomad bridge earlier in
2022.

5. The FTX Collapse

Under the visionary leadership of 28-year-old Bankman-Fried,
FTX achieved incredible success in just three years. With an innovative
approach to marketing, from a Super Bowl ad campaign, the purchase of naming
rights for the Miami Heat’s home stadium, political lobbying efforts, and
industry investments, their estimated value skyrocketed to $32 billion. When
cryptocurrency values dropped sharply in early 2022, his sound business acumen
enabled efficient deals totaling around $ 1 billion, aiding struggling
companies held back by token price declines.

In November 2022, a 10-day period of tumult began when
CoinDesk uncovered that Alameda Research – the quant trading firm overseen by
Bankman-Fried – held an immense $5 billion stake in FTT, FTX’s native token. Of
particular concern was its undisclosed leverage and solvency, as it had based
its investment framework on this specific crypto asset over other traditional
or digital currencies. This news sparked disquiet throughout the whole
cryptocurrency field.

On Nov 8th, the world’s largest cryptocurrency exchange,
Binance announced that it had reached a non-binding agreement to purchase
FTX’s non-U.S business branch at an undisclosed cost. However, after corporate
due diligence raised concerns about customer fund mishandling and other issues
on Nov 9th., Binance pulled away from the deal resulting in no bailout being
granted by one of its close rivals.

The sudden collapse of FTX highlights the fragility of
cryptocurrency markets and could further dissuade potential investors concerned
about security.

Unfortunately, customers may not be able to recoup their assets
due to this incident, potentially leading them down an arduous legal path. The
severe repercussions from the failure of FTX have also prompted regulatory
authorities such as the U.S. SEC to consider tighter scrutiny on
cryptocurrencies going forward.

Conclusion

Despite the tumultuous crypto markets and platforms crumbling, many remain hopeful that their digital currency will one day reach its stratospheric potential. With unwavering optimism in the face of a financial rollercoaster ride, this passion for cryptocurrency has no bounds!

The potential of cryptocurrency as a long-term investment is
still largely unknown, yet it continues to capture the attention and
speculation of investors worldwide. Experts may make their best guesses about
what will happen in its future value, but no one can say for certain. It’s important to approach such investments with caution.