7 biggest crypto collapses of 2022 the industry would like to forget 2022 has been a bumpy year for the cryptocurrency market, with one of the worst bear markets on record and the downfall of some major platforms within the space. The global economy is beginning to feel the consequences of the pandemic, and clearly, this has had an influence on the crypto industry.

Below is a breakdown of some of the biggest disappointments in the crypto space this year.

Axie Infinity’s Ronin Bridge hacked

In March of this year, Ronin, the blockchain network that runs the popular nonfungible token (NFT) crypto game Axie Infinity, was hacked for $625 million. The hacker took 173,600 Ether

ETH

$1,215 and 25.5 million USD Coin

USDC tickers down

$1.00 from the Ronin bridge in two transactions.

When the Lazarus Group started its attack, five of the nine private keys for the Ronin Network’s cross-chain bridge were hacked. With this vote, they authorized two withdrawals totaling $25.5 million in USDC and 173,600 ETH.

According to the Ronin group, Axie Infinity’s issues began in November 2021, when its user base had expanded to an untenable size. Consequently, the corporation’s safety rules had to be relaxed to fulfill client demand. After the initial phase of fast development was completed, the firm reduced its safety procedures.

The main difficulty was a lack of a suitably decentralized network created by game developer Sky Mavis. The hacker acquired access to the private keys of five of Sky Mavis’ Ronin Chain’s nine validator nodes, enabling them to compromise the network. When the hackers gained control of five nodes, they essentially controlled over half of the network and were free to accept or deny whatever transactions they wanted. They obtained ETH and USDC via falsifying withdrawals.

The crime occurred on March 23, but it was only noticed on March 29, when a user reported being unable to withdraw 5,000 ETH from the Ronin bridge ATM. In the aftermath of the attack, Axie Infinity developers raised $150 million to reimburse the affected users.

TerraUSD/LUNA collapse

On May 7, when over $2 billion in TerraUSD (UST) was unstaked (removed from the Anchor Protocol), hundreds of millions of United States dollars were quickly liquidated. It’s unclear if this was a deliberate attack on the Terra blockchain or a response to rising interest rates. Because of the enormous outflow of cash, the price of UST fell from $1 to $0.91. As a result, market players started trading $0.90 in UST for $1 in Terra (LUNA).

When a considerable amount of UST was moved out, the stablecoin depegged. The availability of LUNA increased as more people sold their UST during the panic.

Following this fall, cryptocurrency marketplaces started to suspend trading pairs such as LUNA and UST. Following the initial accident in May, Do Kwon disclosed a rehabilitation plan for LUNA, and things seemed to improve. However, the currency’s value eventually fell. It was abandoned almost as soon as it began. Finally, Terra launched a whole new currency known as LUNA 2.0.

Investors lost a combined $60 billion due to the panic selling that accompanied the decline of TerraUSD Classic (USTC) and Luna Classic (LUNC), a related token.

On Sept. 14, a South Korean court issued an arrest warrant for Do Kwon. This happened four months after Terraform Labs’ LUNA and UST tokens collapsed. Do Kwon and five others were detained for allegedly violating regional market restrictions.

Three Arrows Capital collapse

When LUNA and Terra collapsed, the crypto hedge fund Three Arrows Capital (3AC), which had a peak market valuation of more than $560 million, suffered significantly. 3AC had invested heavily in several troubled cryptocurrency projects, including the play-to-earn game Axie Infinity, which lost $625 million to a North Korean hack this year, and the centralized cryptocurrency exchange BlockFi, which laid off hundreds of employees in mid-June.

The UST collapse shattered investor confidence and expedited the slide of cryptocurrencies, which was already underway as part of a bigger flight from risk. A flood of margin calls from 3AC’s lenders sought repayment, but the firm lacked the funds to meet the requests. In addition, many of the company’s counterparties could not meet their investors’ expectations, many of whom were retail investors promised 20% annual returns.

The crypto hedge fund eventually collapsed after taking on major directional trades and borrowing from over 20 institutions, and the founders defaulted on its payments.

Because the founders would not appear in court, the lawsuit proceeded without them. In a leaked court document filed with the Singapore High Court, the Singapore government was asked to accept liquidation proceedings and work with liquidators. As liquidators try to wind down the failed crypto business of Three Arrows Capital, U.S. Bankruptcy Judge Martin Glenn has issued subpoenas to the company’s founders.

Voyager Digital’s fall

On July 6, prominent cryptocurrency investment firm Voyager Digital filed for bankruptcy after crypto hedge fund 3AC defaulted on a $650 million loan. 3AC received a significant loan from Voyager with no security. When 3AC defaulted on all of its obligations and its owners left, Voyager lost a significant sum of customer money.

Trading, withdrawals, and deposits were all suspended when Voyager reported that 3AC would not repay its loan. In June, Sam Bankman-Fried, billionaire CEO of trading firms FTX and Alameda Research, presented Voyager with a $500 million line of credit to help them weather the market collapse.

On July 5, 2022, Voyager Digital Holdings filed for bankruptcy in the Southern District of New York. According to Voyager Digital, the corporation owes between $1 billion and $10 billion to its more than 100,000 debtors. Despite its debts, however, the company believes it has assets worth between $1 and $10 billion. They also guarantee that adequate money is available to pay off the company’s unsecured creditors.

In a September court filing, insolvent cryptocurrency broker Voyager Digital revealed that it would auction off its remaining assets.

Celsius crash and liquidity crisis

Celsius’s value plummeted on July 13, 2022, when one of the main crypto businesses, Celsius Network, declared bankruptcy. As the price of cryptocurrencies fell, investors on the Celsius network started withdrawing their Bitcoin

BTC

$16,834 holdings in search of safer alternatives.

Consequently, panicked investors left Celsius in volume. Despite stating they were forced to do so due to “extreme market conditions,” Celsius Network halted BTC withdrawals, swaps and transfers on June 12. Users of the site understandably thought that Celsius had declared bankruptcy and would be unable to refund their money. The value of the Celsius cryptocurrency plummeted by 70% in only a few hours and fell further in the days that followed.

The crypto market has seen a significant sell-off due to the insecurity and falling prices of many major cryptocurrencies, which corresponded with the drop in the price of Celsius. In addition, due to escalating cash flow issues, Celsius announced 23% layoffs on July 3, 2022. When the time came, the company filed for bankruptcy on July 13, 2022.

Celsius had total liabilities of $6.6 billion and assets of $3.8 billion, resulting in a $1.2 billion hole in the company’s balance sheet due to the court ruling.

FTX collapse

FTX and its U.S. equivalent, FTX.US, filed for Chapter 1 1 bankruptcy on Nov. 11. The exchanges collapsed due to a lack of liquidity and money mismanagement, resulting in a large number of withdrawals from fearful investors.

Following the announcement of bankruptcy, FTX.US briefly restricted withdrawals on Nov. 11, despite earlier promises that FTX.US would be unaffected by FTX’s liquidity concerns. On the evening of Nov. 11, an alleged hack took more than $600 million from FTX wallets. The assault was revealed by FTX in its assistance channel on the instant-messaging network Telegram.

pb24iO“concerning public reports” by denying FTX access to their products, claiming that they had no proof that their tools had been used unlawfully.

Bankman-Fried was arrested in the Bahamas on Dec. 12 at the request of the U.S. government, which wanted him extradited for eight criminal offenses, including wire fraud and conspiracy to defraud investors. Bankman-Fried was eventually deported to the United States and is awaiting trial after posting a $250 million bail.

BlockFi bankruptcy

The collapse of FTX earlier in the month generated fear and uncertainty across the market. BlockFi, another cryptocurrency exchange, filed for Chapter 11 bankruptcy on Nov. 28. With assets and liabilities ranging from $1 billion to $10 billion, the firm had over 100,000 creditors. In addition, they had a $275,000,000 debt to Sam Bankman-Fried’s American subsidiary, FTX US. The application shows that the largest client has a balance of $28 million.

Following the demise of Three Arrows Capital, multiple firms, including the crypto company that operates a trading exchange and an interest-bearing custodial service for cryptocurrencies, had serious liquidity issues.

BlockFi agreed earlier this year to accept a credit package from FTX worth up to $400 million to help it weather a liquidity restriction caused by the exchange’s exposure to the TerraUSD stablecoin’s collapse. As a result of these concerns, BlockFi was reliant on the performance of the cryptocurrency exchange FTX, which may now jeopardize its financial stability.

While 2022 may have been a tough year for the crypto market, there may be a silver lining. Investor sentiment seems to be improving, and the crypto market has always recovered from previous bear markets and platform collapses. The events of 2022 could pave the way for new platforms to learn from the mistakes of their predecessors.

Delivered every Thursday

Subscribe to
our Crypto Biz newsletterEmail Address

Andre Cronje says Fantom will focus on DApp ecosystem expansion in 2023

Fantom has previously pledged to cut its token burn rate by 75% to incentivize DApp development.

244 Total views

4 Total shares

Listen to article

2:24

News

Ho-ho-ho! Get Limited Holiday Trait!

Collect this article as NFT

According to a new Medium post published on Dec. 26, decentralized finance (DeFi) architect Andre Cronje reaffirmed goals and priorities for the Fantom (FTM) ecosystem in 2023. Cronje, who previously created protocols such as Yearn Finance and Keep3rV1, also revealed that he accepted a position as a board of directors member for both Fantom Foundation Ltd and Fantom Operations Ltd, which in turn oversees the namesake directed acrylic graph ecosystem.

"Our overarching objective over the next 12 months will be towards creating an environment for dapp developers to build out sustainable businesses, while differentiating ourselves from other layer 1 solutions."

Key points on Cronje's 2023 Fantom roadmap include gas monetization, which would allow revenue share for decentralized applications, or DApps, as a development incentive. In addition, Fantom DApps would be able to interact without a wallet needing to pay the gas fees itself through gas subsidies. "Users don't need to have or know about FTM [during onboarding]," Cronje wrote.

Other areas of "gas reform" include ending differentiation between smart contracts and externally owned accounts so everyone can initiate transactions and pay for gas. Tokens other than FTM would also be eligible for use as gas fees on the protocol.

In terms of new developments, Cronje plans to focus on building the Fantom Virtual Machine and a new storage mechanism. As for the protocol's financial management, Cronje wrote:

"As has been communicated publicly, we are in a very sustainable and healthy position given the current economic climate, and especially compared to 2018. This is finally one threat to our existence we do not have to be too concerned about."

Cointelegraph previously reported on Dec. 1, 2022 that Fantom announced plans to cut its token burn rate by 75% to fund its DApp reward program. DApps must have recorded 1,000,000 or more transactions and have spent three months or above on the Fantom Opera network to be eligible for rewards.

width=550px

DELIVERED EVERY FRIDAY

Subscribe to the Finance Redefined newsletterEmail Address

By subscribing, you agree to our Terms of Services and Privacy Policy

How to reduce your crypto tax bill before year-end

With 2022 coming to a close, crypto investors can now use Accointing’s crypto tax software to calculate their net tax for all transactions from this year.

Listen to article

4:18

Spotlight

Ho-ho-ho! Get Limited Holiday Trait!

Collect this article as NFT

While 2022 has been a year to forget for most crypto investors, the daunting task of filing crypto tax returns before the end of December remains. Many investors worry about unrealized losses on their crypto portfolio, while a failure to report crypto assets and transactions on tax returns could land North American investors into hot water with the IRS.

To aid in filing your crypto taxes, cryptocurrency portfolio tracking and tax platform Accointing by Glassnode offers an easy solution to instantly import and review all crypto transactions and fill your crypto taxes in just a couple of clicks. What is more, its tax loss harvesting tool helps investors minimize what they owe in taxes.

How to optimize your crypto tax return?

Most crypto assets, especially cryptocurrencies like Bitcoin, have seen significant price erosion in 2022. Some crypto investors may be tempted to reduce their tax bill by underreporting income. Such a strategy, however, would invariably lead to punitive action initiated by the IRS. To avoid that, US crypto investors need to understand all tax provisions available and utilize them to optimize their tax liability to the fullest.

For example, suppose losses from selling crypto assets exceed capital gains accrued by selling profitable positions. In that case, investors can deduct up to $3,000 against ordinary income and carry forward any remaining loss to the next accounting year. This excess can then be adjusted against any capital gains arising in the following year.

Investors could also sell digital assets that are trading at a price lower than their acquisition cost, only to buy them later within the same year. Although the IRS has excluded stocks and securities from this tax-saving tactic, crypto assets are not treated similarly. As a result, realized loss can be used to offset any capital gains tax while also allowing investors to maintain their net holdings.

How crypto tax loss harvesting reduces your tax bill

When an investor has made a net profit from all crypto transactions in a year, positions currently incurring a loss equivalent to the capital gains accrued can be sold. The loss from these positions can neutralize a portion of the capital gains, thereby reducing the overall tax sum. This method of claiming is known as tax loss harvesting. However, contrary to popular perception, tax loss harvesting isn’t the same as realizing losses and involves many calculations.

The biggest challenges are identifying which crypto assets need to be sold and also computing the extent of loss applicable to those positions. Positions sold within 365 days are subjected to short-term capital gains tax rates, while those held for more than a year are treated as long-term capital gains.

Say “Hello” to Accointing’s universal crypto tax calculator

Many crypto tax calculator providers on the market charge a monthly fee, making these tools untenable for most retail crypto investors.

This is where Accointing’s portfolio tracking and compliance solution can benefit the 27-million-strong U.S. crypto investor base. Its comprehensive crypto tax calculator is available for free until Dec. 31, 2022 and shows you exactly how much you can save on taxes this year.

Using the tax loss harvesting tool, investors can review which crypto tokens to sell in order to offset any capital gains, making tax loss harvesting a simple activity. Additionally, it only takes five clicks to get an accurate tax report for transactions occurring within 2022, with Accointing’s crypto tax calculator capable of generating reports for portfolios containing up to 50,000 transactions in a calendar year.

With just days left before the close of 2022, Accointing’s crypto tax software can save crypto investors a lot of hassle and help them optimize their tax returns by utilizing its valuable tax loss harvesting tool. With Accointing acquired by on-chain market intelligence provider Glassnode in October 2022, its users will ultimately benefit from the combined investment intelligence insights provided by the two companies.

Learn more about Accointing

Disclaimer. Cointelegraph does not endorse any content or product on this page. While we aim at providing you with all important information that we could obtain, readers should do their own research before taking any actions related to the company and carry full responsibility for their decisions, nor can this article be considered as investment advice.