Many people will remember 2022 as one of the most brutal years for the crypto industry. Investors and traders witnessed Bitcoin’s wild price swings, which affected many other cryptocurrencies. Besides, many users watched in horror how some major exchanges collapsed, losing millions of dollars in crypto funds.
Now that the crypto market has begun to recover, we can recall some of the most catastrophic events for the crypto industry last year. So, we present the list of the top six failed crypto projects of 2022.
1. Terra (LUNA)/TerraUSD (UST) Crash
The crash of Terra (LUNA) and TerraUSD (UST) is considered by many the top crypto crash of 2022. LUNA, a regular cryptocurrency, lost over 90% of its value in a few hours. Simultaneously, UST, a stablecoin pegged to the US dollar, lost nearly 99%.
LUNA was backing UST, minting or burning coins to maintain the value of the stablecoin. This fragile balance broke down in May 2022, sending shockwaves across the crypto market. It is estimated that the crash wiped out $300 billion in value across the entire cryptocurrency space. The crypto community has not entirely recovered from this catastrophic event.
Do Kwon, CEO of Terraform Labs (the company that created the Terra blockchain), was heavily criticized for designing such a fragile protocol to back a stablecoin. On September 15, 2022, a court in South Korea issued an arrest warrant for Do Kwon, who is believed to be residing in Singapore. He is accused of violating local market laws.
2. FTX Collapse
The second most devastating event for the crypto industry in 2022 was the implosion of the FTX exchange. Founded in 2019 by Samuel Bankman-Fried (SBF), FTX became one of the most popular exchanges, with more than one million users worldwide. At the beginning of 2022, FTX was valued at $32 billion.
However, a media report suggesting FTX was funneling customers’ funds to Alameda Research (an FTX’s affiliated company) prompted massive withdrawals. Within 72 hours, fearful investors withdrew more than $6 billion, leading to a lack of liquidity. On November 11, 2022, FTX and Alameda Research filed for bankruptcy after failing to merge with rival exchange Binance. Unidentified sources indicated FTX owed more than $8 billion.
SBF was arrested in the Bahamas on December 12, 2022. He was extradited to the United States to face eight criminal charges, including wire fraud and conspiracy to defraud investors. SBF was released on a $250 million bond and lives at his parents' home in California, awaiting trial. If convicted on all charges, he might spend 115 years in prison.
3. BlockFi Bankruptcy
The collapse of the FTX crypto exchange generated fear and uncertainty among investors and traders, which directly affected other companies. BlockFi was another crypto exchange that depended on FTX for a $400 million credit package to stay afloat after the TerraUSD collapse. However, when FTX collapsed, BlockFi followed suit. This exchange filed for bankruptcy on November 28, 2022, with over 100,000 creditors and a $275 million debt to FTX US.
4. Three Arrows Capital (3AC) Collapse
The Terra blockchain collapse severely affected the finances of the Three Arrow Capital (3AC) hedge fund. This hedge fund had invested heavily in several troubled crypto projects. When LUNA and UST collapsed, investors lost confidence and rushed to request repayment from 3AC. The company did not have the funds to repay lenders nor meet investors’ expectations. After borrowing money from several institutions, 3AC defaulted on its payments and announced it was closing down.
This Singapore-based hedge fund owed $3.5 billion to 27 companies. Founded in 2012 by Kyle Davis and Su Zhu, 3AC was one of the institutional investors in cryptocurrencies. The company’s founders were charged with fraud and mismanagement.
5. Voyager Digital Bankruptcy
In early July 2022, Voyager Digital, a prominent cryptocurrency lender, filed for bankruptcy. Voyager Digital provided a $650 million loan with no security to 3AC. But when 3AC defaulted on all its obligations, Voyager Digital lost significant customer funds. Sam Bankman-Fried offered Voyager Digital a $500 million line of credit to help overcome the dire situation. But SBF’s companies FTX and Alameda Research collapsed later. Voyager Digital was left with more than 100,000 debtors and a debt between $1 billion and $10 billion.
6. Celsius Network Crash
Celsius Network, one of the most prominent crypto lending platforms, declared bankruptcy in July 2022. This platform started having financial problems when the Bitcoin (BTC) price significantly dropped. Investors withdrew their crypto holdings en masse, forcing Celsius Network to halt all BTC withdrawals and swaps. Investors panicked, thinking that Celsius Network would not be able to refund their money. As a result, Celsius’ native token, CEL, lost 70% of its value within a few hours. The CEL price dropped even further in the following days.
Final Thoughts
Undoubtedly, 2022 will go down in history as one of the most tumultuous years for the crypto market. We listed the top six failed crypto projects in 2022. However, many more projects failed because of troublesome finances, mismanagement, hacking attacks, etc.
However, despite the many failures in 2022, good things in the crypto world also happened that year. Ethereum 2.0 finally became a reality, and decentralized finance (DeFi) consolidated as a serious contender to traditional financial services. What will happen next? Nobody knows. However, many cryptocurrencies are already showing signs of recovery, and there is a lot of optimism among traders and investors. So, if you want to invest in the crypto market, it might be the right moment to do it! You can buy more than 2,360 cryptocurrencies on LetsExchange.io at competitive rates and without hassle.