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2022 Crypto Market Review
While 2021 presented itself as the rise to glory and immortality for the cryptocurrency market, 2022 showed everybody what it actually takes to get there. It is a wake-up call for most traders to not over-leverage during the bull run unless they are willing to pay the price later on. As the year comes to a close, let’s take a step back to understand the hard truth: how and when exactly, did it all start going wrong?
The first event that shocked the world is with the LUNA and UST crash; an institutional poster child with its 20% yield. But for anybody who actually read the mechanism designed by LUNA – it was easy to detect that it was quite literally a Ponzi scheme, destined for failure. But due to the strong market cap at the time, and newbies diving into the crypto market with no real knowledge of how it works, the design flaws of LUNA were significantly ignored. By then, UST had grown to billions in size and left quite a big hole on most funds in their balance sheets after the blow-up, amounting to a staggering $300 billion in crypto losses.
Consecutively, one of the biggest cryptocurrency lending platforms, Celsius, announced that it will be pausing all withdrawals in June, with growing concerns for bankruptcy – making it impossible for borrowers to get their collateral off the platform, summing to about $4.7 billion worth of assets. A month after, the company filed for bankruptcy protection, revealing a $1.3 billion hole in its balance sheet.
Around the same time, it was also the beginning of the end for 3 Arrows Capital, which skyrocketed to fame during the bull market because of their ultra-bullish stance on crypto and the “zhupercycle” theory, which in the end got popped by the FED for pulling liquidity out of the system. Not only did funds get overly greedy on leverage, but lenders also took literal high FDV “shitcoins” as collateral – a noob mistake even for new traders.
And last but not the least, now known as one of the biggest cryptocurrency scandals of the century, is of course, what used to be the second biggest derivative exchange: FTX. FTX by Sam Bankman-Fried (or SBF) gave a “god-mode” account to Alameda Research, making it impossible to liquidate them. FTX also gave Alameda Research an infinite amount of assets, by allowing them access to most of their customer’s funds. Changpeng Zhao, otherwise known as CZ, the founder, and CEO of Binance, released a series of tweets with allegations that SBF has been conducting questionable transactions behind the scenes and therefore prompting him to liquidate all FTT accounts on Binance, causing a sudden market crash for FTX.
In this sense, we believe, that most of what happened in 2022 was a ripple effect from the greed of 2021 and players failing to adjust to the new macro environment created by high inflation. On the positive side, however, crypto also saw improvements and success stories throughout the year, especially within the NFT and DeFi space. With DeFi platforms handling liquidations clean and transparently, plus the fact that it was able to follow all the transactions after the FTX collapse, proves how transparent blockchain tech can actually be, despite it being called “opaque” and “drug money” by most regulators.
2023 Predictions and Forecast
2022 read like a good novel – with villains like FTX, LUNA, and CELSIUS, paired with its plot twists and turns. It was a hectic story, but we are now ready to look forward to what’s up ahead. The sequel 2023, will primarily deal with…
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