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In crypto’s 14th year, the s*** hit the fan. To put it more precisely: giant players collapsed, markets sank, and even non-enthusiasts were likely somewhat aware of the drama that accompanied crypto’s new levels of mainstream attention in 2022.
This downward trajectory wasn’t the direction things seemed to be heading this time last year. The young industry—born with the launch of bitcoin in January 2009—reached an all-time high market cap in November 2021, bolstered by a newfound interest in digital assets and the rise of NFTs.
But against the backdrop of a tightening economy and international strife, a downturn was nigh, and prices were already plummeting by the start of the new year. On Jan. 1, the price of bitcoin—the largest cryptocurrency by market cap—was down 30% from its all-time high just two months prior. By the end of January, the asset was down nearly 50% from its peak.
The trouble, it turned out, was only just beginning. From the intoxicating highs of the Super Bowl marketing blitz to the shock and fear of the collapse of FTX, here’s a timeline of the crypto industry’s 10 biggest moments in 2022.
If you watched the 2022 Super Bowl, then you probably saw an ad for a crypto company. That’s because four brands flush with marketing dollars—Coinbase, FTX, Crypto.com and eToro—leveraged the Big Game as a coming-out party, each airing a major TV spot during what soon became known as the “Crypto Bowl.”
Some ads were more memorable than others, such as FTX’s tie-up with a skeptical Larry David and Coinbase’s bouncing QR code. The latter commercial ended up winning a Grand Prix at Cannes a few months later.
If the 2022 crypto ecosystem was a line of falling dominoes, then the first to topple was TerraUSD (UST). TerraUSD is a stablecoin intended to be pegged to the U.S. dollar, such that 1 UST equals 1 USD. It is also algorithmically backed by a separate crypto asset called Luna, which is supposed to offer traders an arbitrage opportunity in order for UST to keep its $1 peg.
But starting May 7, large sell-offs depegged UST and caused Luna to decline precipitously. The downward pressure quickly spiraled out of control, and by the end of the week, $45 billion worth of market cap had been erased. The project was dead, with UST trading at less than $0.20 and Luna effectively zero. But the fallout had only just begun.
In late June, Three Arrows Capital (3AC), one of the most prominent crypto hedge funds, filed for insolvency. Documents showed that the firm, which borrowed and invested money across the crypto ecosystem, had lost hundreds of millions of dollars due to the collapse of TerraUSD, in addition to being underwater on various other investments. As 3AC wound down, it took its partners—whom it could no longer pay back—with it.
One notable partner was crypto lender Voyager, which filed for bankruptcy in early July. Then, amid plummeting crypto prices in the wake of TerraUSD and 3AC’s insolvency, crypto lender Celsius also filed for bankruptcy. BlockFi, another lender, managed to survive the contagion but secured a $250 million line of credit from exchange FTX to stay confidently afloat. More on this loan later…
By mid-summer, “crypto winter”—a period in which prices of crypto assets are consistently falling—was in full swing. Bitcoin was down 70% from its all-time high; ether—the second largest cryptocurrency—was down 75%; and numerous so-called “alt-coins” were down far worse.
But despite maintaining its hot streak at the start of the year, the NFT market had fallen the way of crypto. Monthly trading volume was down from over $17 billion in January to $1 billion in June, per blockchain analytics platform Dune Analytics, and interest in both blue-chip and new NFT collections had waned tremendously. The hope that NFTs had firmly established themselves in the mainstream turned out to be an illusion.
As crypto winter worsened, so did macroeconomic headwinds, such as Russia’s war in Ukraine and interest rate hikes by the Federal Reserve. Crypto companies, being the furthest out on the risk curve, were some of the first to substantially reduce their headcounts.
Coinbase laid off 1,100 employees, or 18% of its workforce; NFT marketplace OpenSea laid off 20%; exchange Blockchain.com laid off 25%; numerous other firms, from lenders to exchanges to startups, made cuts of various sizes through the summer months.
Crypto.com, previously one of the more notable exchanges thanks to its heavy marketing spend, reduced its headcount by over 2,000 employees, or between 30% and 40% of its workforce, as first reported by Ad Age. The cuts, which were far greater than the company publicly announced, were accompanied by numerous reductions to Crypto.com’s marketing partnerships.
Read more: Inside Crypto.com’s marketing meltdown
Amid the months of crypto contagion, one very positive event did occur: An update to the Ethereum blockchain, called “The Merge,” went through its final stage in mid-September, and upon completion, the network became 99.99% more energy efficient.
“The Merge” had been in planning for years, and its numerous phases of testing and retooling and testing again had stirred up a feeling that the update may not get completed at all. But once “The Merge” was deemed successful, many in the space were able to breathe a sigh of relief. Moreover, a lack of sustainability had always been a core complaint of Ethereum. With its new structure, however, the network not only showed that it can change for the better, but also that its community of developers and users was able to come together to actually make it happen.
Read more about “The Merge” here
In early October, Kim Kardashian was forced to pay the Securities and Exchange Commission (SEC) $1.26 million over an undisclosed promotion of a crypto asset. The token in question was called EthereumMax (emax), and the group behind the project paid Kardashian $250,000 to promote the coin to her many millions of Instagram followers in June 2021.
The SEC ruled Kardashian did not properly disclose that her posting about it was a paid promotion. While not the first crypto-touting celebrity to be fined by the SEC, Kardashian is definitely the most recognizable, and her punishment was a reality check to all crypto companies using celebs to partner with their projects.
While not strictly a crypto event, Elon Musk’s takeover of Twitter had immediate implications for the digital asset space. Musk is a figurehead in the crypto ecosystem (he persistently shills dogecoin and Tesla previously owned nearly $2 billion in bitcoin), and many believe that his ownership of the social media platform will result in future integrations with crypto technology, as well as a generally friendlier acceptance of the currencies.
Musk himself has already teased how Twitter might use crypto, including through dogecoin integration and a heavier focus on crypto payments.
Industry watchers had to wait until November to catch the most stunning event in crypto’s year, and perhaps its entire history. FTX, the exchange that earned itself a reputation of being one of the most trustworthy and mature actors in the space, collapsed.
It all went down when CoinDesk leaked a balance sheet for Alameda Research, a hedge fund closely tied to FTX and co-founded by Sam Bankman-Fried—also co-founder and CEO of FTX. Alameda’s assets appeared to mainly consist of FTT, a token that FTX created to give users discounts on its platform. This was a big problem considering the token’s poor liquidity, but it only got worse when Binance dumped its huge share of FTT, creating a run on the token and plummeting its value. FTX, also a massive holder of FTT, suddenly announced Binance would acquire it, but when the deal fell through, no one else stepped in and FTX filed for bankruptcy—nine days after the CoinDesk leak.
How did this happen? The industry is very much still sifting through the rubble, but what has come to light is no less than one of the largest cases of financial fraud in recent history. Crypto sleuths, reporters and analysts have discovered that Bankman-Fried used billions in customer deposits—which are supposed to be untouchable by FTX—to make loans to Alameda, after Alameda suffered major losses tied to the summer’s various collapses.
Many other mistakes were made along the way, including FTX executives taking loans from Alameda to fund political contributions and Bahamian estates. By the end of November, the SEC and DOJ opened investigations into FTX; Bankman-Fried resigned. His replacement, John Ray III, an insolvency expert who oversaw Enron’s liquidation, said in a court filing that in 40 years, he had never seen “such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here.”
Related: Why FTX’s implosion poses marketing concerns
It is still very early in the wake of FTX’s collapse, but the damage has already started to spread. Crypto lender Genesis—one of the largest in the space—is said to be on the verge of bankruptcy, liquidations have destroyed numerous trading positions and the prices of crypto assets reached lows not seen since 2020. Even FTX celebrity spokespeople, such as Tom Brady and Steph Curry, now face a class-action lawsuit over their promotion of the platform.
Most recently, another firm announced bankruptcy: BlockFi, the lender that FTX had previously assisted with a $250 million loan to survive the fallout from the summer’s wreckage. BlockFi is the latest domino to fall, tracing a direct line from November’s events to May’s. But if there’s anything you can be sure of in crypto, it’s that BlockFi won’t be the last domino.
In this article:
Asa Hiken is a technology reporter for Ad Age covering the intersection of Web3 and marketing, including crypto, NFTs and the metaverse.
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