After the lackluster rally of cryptocurrency in 2021, which saw many new millionaires and many crypto startups gain unicorn status, came the dramatic decline in 2022. The industry has been plagued by macroeconomic pressures, scandals and crashes that wiped out fortunes overnight.

As 2022 draws to a close, many cryptocurrency proponents are puzzled about the state of the industry, especially in light of the recent FTX crash and the contagion it caused, wiping out many associated companies.

Many who couldn’t stop talking about cryptocurrency and recommending their family to invest in it last year at Christmas dinner, can see that the tables have turned this year, with a lot going on about the state of cryptocurrency today. While this conversation will be embarrassing, Cointelegraph has put together a short recap to help the “crypto brothers and sisters” explain what really happened to cryptocurrency in 2022 when market pundits were projecting a continued rally throughout the year.

The downfall was global, but cryptocurrency turned it into a contagion
The onset of the cryptocurrency’s decline was triggered by external factors, including rising inflation, interest rate hikes by the United States Federal Reserve, and the international conflict between Ukraine and Russia that shook investors’ confidence in the market, leading to sell-offs in fiat and cryptocurrencies. markets.

External market conditions, aided by a centralized, unchecked decision-making process, have harvested their first big player in this bullish cycle in Terra. The $40 billion ecosystem was reduced to rubble in a matter of days. More importantly, it created a crypto infection that claimed at least half a dozen other cryptocurrency players, especially cryptocurrency lenders who were exposed to the Terra ecosystem.

The collapse of the Terra ecosystem had the biggest impact on lenders, bankrupting Three Arrows Capital and many others. Celsius temporarily halted withdrawals due to severe market conditions, which caused cryptocurrency prices to plummet, and then declare bankruptcy. BlockFi had to be bailed out by FTX with a $400 million cash injection.

Cryptocurrencies, Cryptocurrency Exchange, FTX, New Year’s Special
At the time, FTX seemed very eager to bail out several struggling cryptocurrency lenders. But, after only a quarter of an hour, it turned out that FTX was not as rich in liquidity and cash as it had claimed. In fact, the cryptocurrency exchange has been using its native tokens and non-existent internal projects as leverage against billions of dollars in valuations and loans. Its sister company, Alameda Research, was found involved in the construction of a house of cards that eventually collapsed in November.

Cryptocurrency exchange FTX and its founder, Sam Bankman-Fried, built a philanthropic worldview, which turned out to be an outright scam and theft of customer funds. The former CEO was discovered to be embezzling client funds and was eventually arrested in the Bahamas on December 11th.

Related: The FTX Crash: Lehman Brothers’ Moment in the Crypto Industry

Bankman-Fried was extradited to the United States for securities fraud and misappropriation of funds. However, the former CEO successfully secured a $250 million bond bail lawsuit that his homeowner parents paid to cover his astronomical bail bond.

While Bankman-Fried’s arrest and trial in the United States has given some hope to FTX users, the chances of many customers getting their money back are slim as lawyers predicted it could take years and even decades to get the money back. .

Cryptocurrencies, Cryptocurrency Exchange, FTX, New Year’s Special
SBF handcuffed during his extradition to the United States. Photo: Royal Bahamas Police
It may not be easy to explain a cascading crypto infection caused by a series of bad decisions and the greed of a family oligarch. So, admit it – everyone makes mistakes in a bull market, thinking they’re doing the right thing by involving their family. However, one can always talk about the silver linings and lessons learned from mistakes, and the cryptocurrency contagion of 2022 is no different.

Centralized exchanges and currencies may come and go, but bitcoin will remain
The collapse of the Terra ecosystem was a major setback for the crypto industry — both in terms of value and how it is perceived by the outside world. Crypto managed to take the brunt of the crash and was on its way to recovery, only to face another blow in the form of FTX. The FTX saga isn’t over yet, but it has brought to light what corruption and massive donations can do to your public image even when you’ve robbed people of billions of money.

The mainstream media frenzy saw the likes of The New York Times and Forbes write blowout articles to the criminal former CEO before he was charged. Bankman Fried has been portrayed as someone who was the victim of bad decisions when FTX and Alameda were involved in illegal trading from day one, as stated by the SEC in their charges.

Related: Regulators Face Public Outrage After FTX Collapse, Experts Call