I think it’s safe to say that 2022 was an exceptionally bad year for crypto. The previous year had seen many cryptocurrencies breaking their all time highs which caused a high degree of FOMO and a lot of people piled into crypto. Unfortunately, as what often happens, many investors bought at the all time high and subsequently crypto took a nosedive in the beginning of 2022 and things just got worse from there. Let’s take a look at where it all went wrong.

3 Arrows Capital

Bitcoin reached an all time high of $69000 near the end of 2021, everyone was bullish and analysts were calling for Bitcoin to hit $100k by the end of the year. Well, as we all know, this never happened and the price began to decline. By May, the price had fallen to $28000 which wiped out a lot of investors that were using leverage on their investments. Three Arrows Capital was a crypto hedge fund that was based out of Singapore, they were engaged in very risky over leveraged  trading which caused them to go bankrupt and were forced to liquidate in June 2022. Unfortunately, a number of other crypto firms were tied to them and when Three Arrows went bankrupt it caused a domino effect in the crypto world.

Voyager and Celsius

Voyager and Celsius were two crypto entities that were offering very attractive yields on stable coins and crypto that investors entrusted to them. Unfortunately, they weren’t completely transparent with how they were generating those great returns. Both these companies had invested huge amounts with Three Arrows Capital and when Three Arrows declared bankruptcy, it took these two companies with it. There were many investors who had Billions invested on these platforms, it remains to be seen how much they will recover after the bankruptcy process has been completed.

The collapse of FTX

I am still scratching my head and wondering just how this crypto exchange got so much money when it was being managed by such incompetent people. FTX was an exchange that was founded by Sam Bankman-Fried and quickly became a worldwide trusted name in the crypto world. Unfortunately, behind the curtains, it was involved in fraud of the highest magnitude. This fraud eventually got called out by the owner of the crypto exchange giant Binance after he liquidated all of FTX’s native tokens on his exchange. This caused a cascade effect and soon after, FTX declared bankruptcy. The fraud was so toxic that I feel deeply for investors that had funds on the exchange and I fear that the losses are a high percentage of their investment.

The good news is that Sam and other higher ups in the company are facing charges and possible long jail sentences.

2023

We are about to enter a new year and with that comes more opportunity and possibly more risk. I highly doubt that crypto will have as bad as year as 2022, but it’s impossible to predict the future. All we can do hope for the best and believe that crypto has a bright future ahead of it.

Happy New Year to all.