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Last year the crypto market was hugely affected due to market volatility and bankruptcies. Investors and crypto users faced the worst bear markets at the end of 2022 due to the sudden collapse of FTX. Before FTX, there were a string of bankruptcies including Terra and Celsius among others. The holders of large wallets, the “whales”, reduced their holdings of Bitcoin during the market turmoil.
According to a Bank for International Settlements (BIS) report, most crypto users faced losses on their Bitcoin holdings due to earlier bankruptcies and cyber attacks on the crypto market. As per the report, more than $450 billion disappeared during the market turmoil following the downfall of Terra in May 2022, and another $200 billion was lost in FTX bankruptcy in November 2022.
In May 2022, the algorithmic stablecoin TerraUSD (UST), which was supposed to keep a one-for-one peg to the US dollar, suddenly collapsed. Within a few days, the UST value plummeted from $1 to almost zero, which sent shockwaves through the market. Earlier, Do Kwon, co-founder of Terraform Labs, was accused of a Ponzi scheme that cost him billions of won. The Seoul government sued Kwon for violating the Capital Market Law and accused five more Terraform employees in the case.
Seoul investigators have been searching for Kwon for the past few months. Since July, the South Korean government has raided Kwon and some Terra employees, including Gopax, Coinone, Upbit, Bithumb, and Korbit. In Sep 2022, the court issued a warrant to arrest Kwon and the other five members involved.
Another big collapse in the history of cryptocurrency happened on November 11, last year. FTX, once the world’s second-largest crypto exchange platform, valued at $32 billion (USD) at its peak, owed millions of frustrated customers money at the end of 2022 due to its liquidity and solvency concerns.
“The median investor would have lost $431 by December 2022, corresponding to almost half of their total $900 in funds invested since downloading the app. Notably, this share is even higher in several emerging market economies like Brazil, India, Pakistan, Thailand and Turkey,” the BIS report highlighted.
Earlier, US lawmakers were urged that they want new crypto guidelines to tackle the upcoming crypto crashes. Crypto analysts believe that clear regulations on stablecoins and crypto assets would help develop the crypto market in the United States.
Rostin Behnam, the chairman of the Commodity Futures Trading Commission (CFTC), says certain regulations are needed to prevent huge losses in the crypto market and to maintain users’ safety. He said that clear regulation would be required on crypto assets that are not securities.
“To ensure the stability of the financial system, societies must decide on the appropriate policy response to address risks in crypto before they become systemic. They should preferably act in a globally coordinated way,” the BIS report said.
Andrew is a blockchain developer who developed his interest in cryptocurrencies while pursuing his post-graduation major in blockchain development. He is a keen observer of details and shares his passion for writing, along with coding. His backend knowledge about blockchain helps him give a unique perspective to his writing skills, and a reliable craft at explaining the concepts such as blockchain programming, languages and token minting. He also frequently shares technical details and performance indicators of ICOs and IDOs.
