The past year was a fateful one for the world of digital assets: concerns about stability outweighed risk appetite, BTC fell 64% as interest rate hikes made investors think twice about such risky assets, and the high-profile collapse of FTX, Celsius and Three Arrows Capital finally undermined confidence in cryptocurrencies, writes Business Insider.

Let’s further consider the main events that shook the crypto world this year.

1. Cryptocurrency prices plummeted under the influence of investor anxiety over interest rate hikes

Cryptocurrency prices began falling in January as the Federal Reserve began raising the interest rate to fight inflation. When the rate rises holding cash becomes more attractive than investing in assets such as stocks, real estate and cryptocurrencies. In January alone, bitcoin fell 19% and etherium fell 29%.

2. Cryptocurrency heavyweights such as Coinbase (NASDAQ:COIN) and FTX were featured in Super Bowl LVI ads

As digital assets grow in 2021, many major crypto exchanges such as Coinbase, Crypto.com and FTX have started spending millions of dollars on major sports event sponsorship deals in a bid to compete for customers. And in particular, one of the famous American soccer players, Tom Brady, also turned out to be one of the most prominent patrons of the FTX exchange. However, by the end of the year, cryptocurrency companies drastically cut back on their sports advertising spending in the face of a market sell-off, and FTX’s partnerships with the Miami Heat, Mercedes F1, and Tom Brady became worthless after the company’s bankruptcy.

3. Stablecoin TerraUSD lost its $1 peg and its subsidiary token Luna collapsed to zero

In May 2022, the Terra steblecoin lost its peg to its fixed value of $1. Tying a crypto asset to a stable reserve asset such as gold or a government currency gives crypto investors greater security for holding money in times of uncertainty. However, UST already began an active selloff on May 7, when crypto investors sold about $2 billion, breaking its peg to the dollar. After that, it dropped sharply in value and a few days later it was trading below 10 cents. At the same time, the price of the Luna token plummeted from an all-time high of $119.51 to zero in just a few days. This led to $20.5 billion in losses for crypto investors in just one week.

4. Celsius Network has frozen the funds of all of its customers

Alex Mashinsky, founder and CEO of the cryptocurrency lending company, has repeatedly said that he hates banks, and in June he announced a freeze on any customer withdrawals as the company faced problems caused by “extreme market conditions,” more specifically, high market volatility. Following the announcement, bitcoin fell 15% to below $23k, and the group’s own token cel fell by a third to 21 cents.

5. BTC fell below $20,000

In total, it has fallen 64% this year. The drop below $20,000 occurred in June, the first time since 2020. Investors view the $20,000 level as a key psychological level for bitcoin that signals a meaningful direction for the leading cryptocurrency.

That’s because bitcoin surged to around $20,000 in 2017,setting a record high at the time. But then in 2018, it experienced a series of collapses that saw its price fall below $4,000. Its fall couldn’t help but affect the rest of the market as well: the price of etherium also held just above $1,000, while altcoins solana and polkadot traded 90% below their record highs in 2021.

6. Hedge fund Three Arrows Capital defaulted on a loan and was liquidated

Crypto company Three Arrows Capital, also known collectively as “3AC,” defaulted on bitcoin loans from lender Voyager Digital and was liquidated by a court on June 27. But that was just the beginning: after Celsius and 3AC liquidated, the value of the cryptocurrency market dropped by $33 billion. The impact of the collapse spread throughout the industry: the firm Voyager filed for bankruptcy a few weeks later, and trading firm Genesis suffered hundreds of millions of dollars in losses because it had lent cryptocurrency to 3AC.

7. FTX files for bankruptcy after solvency crisis amid its native token sell-off

Major cryptocurrency exchange FTX filed for bankruptcy in November after a CoinDesk report surfaced that FTX’s sister trading firm Alameda Research held a significant portion of its portfolio in the exchange’s native token, FTT. In a matter of days, the price of FTT fell from $22 to $1, causing FTX’s solvency crisis. The crypto group was forced to file for bankruptcy on Nov. 17 after CEO and co-founder Sam Bankman-Fried was unable to find a savior and rival exchange Binance refused a similar deal. Further horrifying details emerged, with new CEO John Ray III stating that in 40 years of dealing with bankruptcies, he had never seen as much mismanagement of a company as FTX. The bankruptcy filing revealed that the group’s cryptocurrency assets were worth only $659k and the audit was conducted by a little-known firm with an office in the meta-universe.

8. Former FTX CEO Sam Bankman-Fried was arrested by authorities in the Bahamas on fraud and money laundering charges

FTX co-founder Bankman-Fried has been arrested in the Bahamas to be extradited to the US to face criminal charges – fraud, money laundering and violating campaign finance laws.

Once considered one of the most respected executives in the cryptocurrency market, Bankman-Fried promised to cooperate with regulators and donated millions to the election campaign of U.S. President Joe Biden, so his arrest was the end of a months-long collapse of the crypto empire.

9. Cryptocurrency exchange Binance tried to reassure investors of its financial strength, but customers withdrew $6 billion

Binance has also been under scrutiny from regulators and the public since the incident with rival cryptocurrency exchange FTX. In December, customer outflows from its platform reached $6 billion in 72 hours, raising fears that the platform could be facing a liquidity crisis as its native token, Binance Coin, rapidly depreciated. To assuage doubters, Binance brought in French accounting firm Mazars to audit its cryptocurrency assets. But Mazars suspended all of its work due to concerns about how its reports would be understood by the public. That said, Binance’s financial reports are largely hidden from public view.
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