What to Tell Your Family About What Happened with Cryptocurrencies This Year

The crypto boom in 2021 was lackluster, with many new crypto millionaires and several crypto startups achieving unicorn status, but 2022 saw a dramatic decline. The industry was plagued by macroeconomic pressures, scandals and meltdowns that wiped out fortunes virtually overnight.

As 2022 draws to a close, many crypto advocates are perplexed about the state of the industry, especially in light of the recent FTX collapse and the contagion it has caused, leading to the bankruptcy of several companies associated with it.

Many people who couldn’t stop talking about cryptocurrencies at Christmas dinner last year and encouraging their families to invest in cryptocurrencies have turned the tables this year and have had a lot to say about the state of cryptocurrencies today. The conversation will be awkward, but Cointelegraph has revealed what actually happened to cryptocurrencies in 2022, when market experts expected the rally to continue throughout the year. We’ve prepared a short summary to help “Brothers and Sisters of Currency” explain.

Downfall Was Universal, But Crypto Turned It Into Contagion

The onset of the cryptocurrency’s decline was triggered by external factors such as rising inflation, rate hikes by the US Federal Reserve, and international disputes between Ukraine and Russia that have shaken investor confidence in the market, pushing traditional currencies into decline. and led to the sale of virtual currency. market.

External market conditions, aided by unchecked and centralized decision-making processes, claimed to be the first big player in this bull cycle in Terra. A $40 billion ecosystem was in ruins in a matter of days. More importantly, it created a crypto-contagion that claimed at least six other crypto players, including crypto-lenders who were mostly exposed to the Terra ecosystem.

The collapse of the Terra ecosystem has had the biggest impact on many companies, including the bankruptcy of lender Three Arrows Capital. Celsius suspended withdrawals due to extreme market conditions and declared bankruptcy after the price of the cryptocurrency fell. BlockFi had to be bailed out by FTX with his $400 million cash injection.

At the time, FTX seemed too eager to bail out some troubled cryptocurrency lenders. However, just a quarter later, it turned out that FTX was not as liquid and cash-rich as claimed. In fact, cryptocurrency exchanges used native tokens and in-house nonexistent projects as leverage against billions of dollars in valuations and loans. Its sister company, Alameda Research, was eventually found to be involved in the construction of the House of Cards, which collapsed in November.

The FTX crypto exchange and its founder, Sam Bankman-Fried, gave the world a philanthropic outlook, but it turned out to be a complete scam, stealing customer funds.Former CEO was found to be misappropriating client funds and was eventually arrested in the Bahamas on December 11.

Related: FTX Collapse: The Lehman Brothers Moment of the Crypto Industry

Bankman-Fried was extradited to the United States on charges of securities fraud and embezzlement of funds. But the former CEO managed to secure a bail petition against the $250 million bail paid by his parents who built a house to cover the astronomical bail. .

Bankman-Fried’s arrest and his trial in the US gave FTX users some hope, but lawyers predicted it could take years, even decades, to get their money back. Therefore, many customers are unlikely to get their funds back. .

Two back-to-back crypto-contagions caused by a series of bad decisions and greed in the minority may not be an easy thing to explain to your family. Everyone makes mistakes in bull markets thinking they’re doing the right thing by getting their families involved. But we can always talk about the bright side and the lessons learned from our mistakes, and the cryptocurrency epidemic of 2022 is no exception.

Centralized exchanges and coins may come and go, but Bitcoin will stay

The collapse of the Terra ecosystem was a significant setback for the cryptocurrency industry in terms of value and how the outside world perceives it. Cryptocurrencies bore the brunt of the collapse and were on their way to redemption, only to face another blow in the form of FTX. FTX’s story isn’t over yet, but it has highlighted the impact of corruption and large donations on public image, even as it robs people of billions of dollars.

A mainstream media frenzy led the likes of The New York Times and Forbes to write puff pieces for the criminal ex-CEO before he was indicted. Bankman Fried was portrayed as the victim of bad decisions when FTX and Alameda were involved in illegal trading from day one.

RELATED: Regulators face public outrage after FTX collapse, experts call for adjustments

The downfall of FTX and the epidemic of cryptocurrencies is portrayed by many as the end of trust in the cryptocurrency ecosystem. U.S. regulators have warned this is just the beginning of a crackdown on cryptocurrencies, with SEC chief Gary Gensler comparing cryptocurrency platforms and intermediaries to casinos.

However, any cryptocurrency veteran will tell you that the industry has gotten worse and has always bounced back. The collapse of the third-largest cryptocurrency exchange (FTX) is certainly significant, but in the early days of cryptocurrency exchanges he would fall short of hacking Mt. Gox.

Mt Gox was once the biggest outsider to question the cryptocurrency industry, especially Bitcoin (BTC). When the exchange was hacked in 2014, he accounted for over 70% of BTC trading at the time. The hack had a huge impact on BTC’s price at the time, but the market rose again in the next cycle.

A few years later, the demise of FTX once again reminded users of the risks inherent in centralized entities and caused a significant movement of funds from centralized exchanges to self-custody wallets. -off means wallet security will also be their sole responsibility.

Crypto users are withdrawing funds from crypto exchanges at a rate not seen since April 2021.

According to new data from on-chain analytics firm Glassnode, the number of wallets receiving BTC from exchange addresses reached nearly 90,000 on November 9th. The movement of funds away from exchanges is usually a bullish sign that BTC has been “delinquent” for a long period of time. semester.

All other tokens may look favorable in a bullish run, as evidenced by the last tokens in the top 10, such as LUNA, Shiba Inu (SHIB) and Dogecoin (DOGE). But today, these projects like Terra-LUNA or Memecoin are either outdated or far from the bullish hype.

Bitcoin, the original cryptocurrency, has seen several major exchange declines over the past decade, but has risen above each of those collapses in the next cycle. This is why most early crypto investors and bitcoin advocates advocate self-control and holding BTC over investing in newer altcoins that may look lucrative in a bull market, but the next bull market There is no guarantee that the market will be reached.

With these centralized bodies collapsing in 2022, policymakers could finally come up with some form of formal, universal regulation to ensure investor safety.

Conclusion

Decentralization and the core technology of Bitcoin will remain here, OG cryptocurrency, regardless of the crypto entity involved in facilitating various use cases and services. waves may come. Users believe in self-management rather than depositing funds on exchanges. Also, especially in a bull market, it’s best not to give financial advice to anyone.