After a lackluster rise of crypto in 2021, which saw many new crypto millionaires and several crypto startups accomplish unicorn status, came the dramatic fall in 2022. The industry was plagued by macroeconomic pressures, scandals and meltdowns that wiped out fortunes almost overnight.

As 2022 comes to a close, many crypto proponents are perplexed about the land of the industry, peculiarly in light of the recent FTX plummet and the contagion information technology has caused, taking down several firms associated with it.

Many who couldn’t stop talking about crypto and recommending their family to invest in it last yr at Christmas dinner could see the tables turn this year, with them having a lot of explaining to practice about the land of crypto today. While as awkward as that conversation is going to be, Cointelegraph prepared a small-scale recap to help ‘crypto bros and sisters’ explain what really happened to crypto in 2022 when market pundits were expecting the rise to continue throughout the year.

The downfall was universal, but crypto turned it into a contagion

The start of the crypto downfall was triggered by external factors, including growing inflation, charge per unit hikes from the U.s.a. Federal Reserve and the international conflict between Ukraine and Russia that shook investor confidence in the market, leading to a sell-off in traditional and crypto markets.

The external marketplace conditions, aided by the unchecked centralized controlling process, claimed its first large player of this balderdash wheel in Terra. The $40-billion ecosystem was reduced to ruins within days. More than importantly, it created a crypto contagion that claimed at to the lowest degree half a dozen other crypto players, mainly crypto lenders that had exposure to the Terra ecosystem.

The collapse of the Terra ecosystem had the greatest impact on lenders, bankrupting Three Arrows Majuscule and many others. Celsius paused withdrawals due to extreme market conditions, causing crypto prices to fall, and and so alleged bankruptcy. BlockFi had to exist bailed out by FTX with a $400 million cash injection.

Cryptocurrencies, Cryptocurrency Exchange, FTX, New Year's Special

At the fourth dimension, FTX seemed too eager to bail out several troubled crypto lenders. Only, only a quarter after, it turned out FTX was not every bit liquid and cash-rich as information technology claimed to exist. In fact, the crypto commutation was using its native tokens and in-business firm, non-existent projects as leverage against multi-billion-dollar valuations and loans. Its sis visitor, Alameda Research, was found to be involved in building a business firm of cards that eventually came crashing downwards in Nov.

The FTX crypto exchange and its founder, Sam Bankman-Fried, have built a philanthropic outlook for the globe, turned out to be outright fraud and stole customers’ funds. The former CEO was found to be misappropriating customers’ funds and was eventually arrested in the Bahamas on December. 11.


Related:



FTX plummet: The crypto industry’south Lehman Brothers moment

Bankman-Fried was extradited to the Usa on charges of securities fraud and misappropriation of funds. However, the onetime CEO managed to secure a bond plea against a $250 million bail paid by his parents who put upwardly their firm to embrace his astronomical bail bond.

While the arrest of Bankman-Fried and his trial in the U.S. have given some hope to FTX users, the chances of many customers getting back their funds are very slim equally lawyers have predicted that it might take years and fifty-fifty decades to go the funds back.

Cryptocurrencies, Cryptocurrency Exchange, FTX, New Year's Special
SBF in handcuffs during his extradition to the U.South. Photograph: Imperial Bahama islands Police

Two dorsum-to-dorsum crypto contagions caused by a serial of bad decision-making and the greed of a few, might not be an easy thing to explicate to the family. And so, own up — everyone makes mistakes in the balderdash market, thinking they are doing the correct thing past getting their family involved. However, one can always talk nigh the bright sides and the lessons learned from the mistakes, and the 2022 crypto contamination is no different.

Centralized exchanges and coins may come up and go, merely Bitcoin will stay

Terra ecosystem’s collapse was a significant setback for the crypto manufacture —both in terms of value and how the outside earth perceives it. Crypto managed to bear the brunt of the collapse and was on its fashion to redemption, simply to face another knock in the form of FTX. The FTX saga is far from over but it highlighted what corruption and hefty donations can do to your public image even when you have robbed people billions of their money.

The mainstream media frenzy saw the likes of the New York Times and Forbes write puff pieces for the criminal former CEO before the charges were framed against him. Bankman Fried was portrayed as someone who was a victim of bad decisions when FTX and Alameda were involved in illicit trading from day 1, as mentioned past SEC in their charges.


Related: Regulators face public ire after FTX collapse, experts call for coordination

The FTX downfall and the crypto contagion are being portrayed by many as the end of trust in the crypto ecosystem. U.Southward. regulators are warning that information technology is only the start of the crypto crackdown, with SEC chief Gary Gensler comparing crypto platforms and intermediaries to casinos.

However, any crypto veteran will tell you that the industry has seen much worse and has always bounced back to its feet. While the collapse of the tertiary largest crypto exchange (FTX) is definitely meaning, information technology doesn’t come close to the Mt. Gox hack from the early days of crypto exchanges.

Mt. Gox was once the biggest external gene that cast doubt on the cryptocurrency manufacture, particularly Bitcoin (BTC). When the commutation was hacked in 2014, it business relationship for more than 70% of BTC transactions at the time. The hack did have a wild impact on the price of BTC at the time, but the market shot support again in the next cycle.

Click “Collect” below the illustration at the top of the page or

follow this link
.

Years later, the FTX plummet once over again reminded users of the risks involved with centralized entities, triggering a significant move of funds from centralized exchanges to self-custody wallets.” Self-custody wallets permit users to serve as their own banking company, but the trade-off is that wallet security also becomes their sole responsibleness.

Crypto users are withdrawing their funds from crypto exchanges at a rate not seen since April 2021, with nearly $three billion in Bitcoin withdrawn from exchanges in November, moving them to self-custody wallets.

New data from on-chain analytics business firm Glassnode shows that the number of wallets receiving BTC from exchange addresses hit almost ninety,000 on November. 9. The movement of funds abroad from exchanges are commonly a bullish sign that BTC is being “hodled” for the long term.

Every other token might expect lucrative in a bull run, as evident from the final ane where the likes of LUNA, Shiba Inu (SHIB) and Dogecoin (DOGE) broke into the superlative 10. But today, these projects be it Terra-LUNA or meme coins are either obsolete or far from their balderdash run hype.

Cryptocurrencies, Cryptocurrency Exchange, FTX, New Year's Special

Bitcoin, the original cryptocurrency, has seen downfalls of several major exchanges over the past decade and yet has come up on top of each of those collapses in the next cycle. This is the reason most early crypto investors and Bitcoin proponents often abet for self-custody and hodling BTC over investing in new altcoins that might seem lucrative in a balderdash run, merely there is no guarantee that they would make it to the next bull run

The plummet of these centralized entities in 2022 could also prompt policymakers to eventually come up up with some grade of official universal regulations to ensure investor security.

The bottom line

The cadre engineering science of decentralization and Bitcoin, the OG cryptocurrency, is here to stay regardless of the crypto entities involved in facilitating different apply cases and services on top of them. 2023 could see a new wave of crypto reforms, with more enlightened users who believe in self-custody rather than letting their funds sit on exchanges. Also, information technology’south better not to give out financial advice to anyone, especially in a balderdash market place.