Worst digital currency events in 2022

2022 was not a good year for digital currencies. Catastrophic events such as widespread hacks, the destruction of several stablecoins, and the fall of investment platforms and FTX exchange added to the severity of the bearish market this year; So, Bitcoin lost more than $25,000 in value, and more than half of Bitcoin holders entered the loss zone.

In addition, as legislation began in the US Congress, we saw an increase in hacks and cyber attacks on exchanges and lending platforms. Now that we are spending the first days of 2023 and looking forward to the market opening, it is okay to review the worst events of the last year and prepare ourselves for the possible events of the new year with a broader perspective. 

Selling 75% of Tesla Bitcoins.

Elon Musk, the CEO of Telsa, has previously shown that not only in the market of his favorite meme coin, i.e.Dogecoin, it has the power to move, but it can also turn the Bitcoin market upside down with just one tweet. Tesla brought a lot of confidence to the digital currency market by buying 1.5 billion dollars of Bitcoin during the market boom in 2021. On the other hand, the sale of 75% of this asset for $936 million in 2022 had an undeniable negative impact on this market. It will make the digital currency winter longer and harder.

Bitcoin’s performance over the past year

Michael Saylor, CEO of MicroStrategy and a fan of Bitcoin, strongly criticized this action by Musk. However, Musk said he needed the cash following the shutdown caused by the coronavirus pandemic in China.

Environmental problems affect Bitcoin.

The dimensions of the Bitcoin network’s energy consumption have been estimated at the level of the total consumption of some countries. This issue resulted in more strictness of the legislators in the field of digital assets market and efforts to approve the Digital Asset Markets Act (MiCA) in the European Union. In addition, the European Central Bank also said that Bitcoin is on a path to becoming obsolete.

Meanwhile, the bansminingIt is also increasing especially in the United States. Also, with the Ethereum merger event changed the network’s consensus algorithm to proof-of-stake and reduced the negative environmental impacts of Ethereum mining to almost zero. With this event, there have been rumors about a similar update in the Bitcoin network.

Forcing Wikipedia and Mozilla to stop accepting donations based on digital currency and Greenpeace’s anti-Bitcoin campaign and forcing the World Wildlife Fund (WWF) to stop selling Non-homogeneous tokens(NFT) that were offered on Ethereum based on Proof of Work at the time, are some of the problems with the Proof of Work algorithm that threaten the future of mining.

The increasing number of NFT thefts

With the increase in the value and applicability of non-coin tokens, the increase in the theft of these assets seemed inevitable, and last year it did not stop even with the sharp decline of the rest of the crypto market. As of August 2022, hackers have stolen more than $100 million worth of tokens, and celebrities’ Discord and Twitter accounts have been hacked for fraud.

Also, one of the former managers of the NFT market OpenSea (OpenSea) was accused of conducting secret transactions. It should be said that secret transactions are done by misusing information that is not available to the public. In another event, the token Board of the Yacht Club famous actor Seth Green, which was supposed to be used in his TV show, was stolen. In the end, Green had to buy back his token for more than $300,000.

El Salvador’s failure to accept Bitcoin

Naib Boquele, the controversial president of El Salvador

El Salvador’s attempt to legalize Bitcoin in this country after one year did not result in anything but failure. Bitcoins that the government of El Salvador bought for $105 million are now worth only $65 million. Meanwhile, in recent polls, more than three-quarters of El Salvador’s citizens want the president to change his policy on Bitcoin.

Despite the ease of transaction fees, less than 2% of payments in this country are made using Bitcoin, and the government has suspended its new Bitcoin-based projects for the time being. The International Monetary Fund’s criticism of the legalization of Bitcoin in El Salvador and refusal to provide loans to this country should also be added to these problems.

Sanctioning the mixer service “Tornadoksh”

Digital currency mixing services help people not to leave a trace of their identity and address during transactions. Therefore, it is obvious that profiteers use these services and are the main target of law enforcement.

However, it is safe to say that no legal action has been as serious as the “Tornado Cash” affair.

The mixing service Tornadoke was put on the US sanctions list due to its use by North Korean hackers.

North Korean hackers used this mixer service after two hacking events for 625 million dollars from the Ronin Bridge protocol and 100 million dollars from the Horizon Bridge protocol.

Tornadoche is an open-source protocol and a Decentralized independent organization(DAO) manages it completely. Therefore, many believe that the criminal use of open-source code cannot be a reason to impeach developers. However, the Tornadoke news story led to the arrest of Alexey Pertsev, the developer of the protocol, in the Netherlands for writing its code. The charge of facilitating money laundering operations has been raised against Pertsev, who had left the development team of this protocol a long time ago.

Discouragement of Indian traders and supply of digital rupee

It seems that India’s fate with digital currencies is still not well defined. Many citizens of this country welcome these assets, But the government has almost banned them. The imposition of a 30% tax on the profits of crypto transactions in this country, which is considered one of the heavy crypto tax rates in the world, caused the disappointment of Indian investors and a significant decrease in the volume of digital currency transactions in this country.

In addition, major Indian exchanges such as WazirX and CoinSwitch Kuber and the Indian branch of the Coinbase exchange suspended their services in April 2022 (April 1401). This happened after the creation of legal ambiguities and the termination of the United Payments Interface (UPI) instant payment system with these exchanges. It should be noted that UPI is managed under the supervision of the Reserve Bank of India (RBI), the main proponent of a complete ban on digital currencies in the country, and is an important payment gateway in the subcontinent.

Indians are grappling with multiple issues for digital asset transactions as the Indian government contemplates launching a national digital currency. In late November, the Reserve Bank of India unveiled its decision to pilot the digital rupee on a network of 400,000 users, including some of India’s largest banks. The goal of this project is the public offering of the digital rupee by the end of 2023.

Elon Musk and buying Twitter

The strange moment Musk entered Twitter with a sink

Elon Musk after buying 9.2% of Twitter shares with Protection People like Jack Dorsey, its former CEO, think the purchase of the entire company fell. He offered money that the board members could not refuse, But this was just the beginning of the story. Musk accused Twitter of having fake user accounts and spam bots that violated the company’s purchase agreement.

After the purchase of Twitter and the announcement of the acceptance of digital currency payments in this application, Elon Musk’s favorite coin, i.e. Dogecoin, experienced several sharp drops. In addition, in his first move after joining Twitter, Musk immediately fired senior executives and half of the staff. This action was done so hastily that some efficient people of the company were fired. This carelessness forced Twitter to ask some people to return to work.

The re-opening of Donald Trump’s account and the immediate blocking of Kanye West’s account just for posting the image of a “swastika” (broken cross) raised many concerns about the verbal violence and content of this social network. This uproar caused big brands such as Volkswagen and Pfizer to remove their ads from this website. Musk also got into trouble with Apple about this issue. Apple had threatened to remove both its ads from Twitter and the Twitter app from the App Store.

SEC stonewalling on the way of lending applications

While Coinbase’s anger over the 2021 threat from the US Securities and Exchange Commission (SEC) regarding its lending program had not subsided, the commission announced a $100 million fine against BlockFi for a similar issue.

SEC Actions Against Lending Platforms

In continuation, the problems caused by unsecured loan payments and the loss of millions of customers in lending platforms such as Celsius and Voyager Digital also became the reason for the sensitivity of the legislators and federal agencies on lending platforms and profit More than them.

The lending platform Nexo, which suffered several heavy financial losses, announced that it was leaving America. This platform found the reason for this to be the legislators who are not interested in constructive dialogue. It should be noted that BlockFi’s bad luck did not end here. BlockFi was first saved from bankruptcy with the help of FTX exchange; But soon after the collapse of this exchange, it returned to its former state. 

Digital currencies as securities

The general belief in the digital currency community is that these currencies are not securities; But as the end of 2022 approaches, this belief is under more threat. It started last year with Ripple’s court case for selling securities without a license in the form of the XRP token, and it gradually spread to other platforms.

Wyoming Republican Senator Cynthia Lummis said in December 2022 that the proof-of-stake merger event Ethereum 2 It probably turned digital currency into securities. Gary Gensler, the chairman of the US Securities and Exchange Commission, had previously expressed the same opinion.

The collapse of digital currency lending platforms and the FTX exchange caused some members of Congress, such as Tom Emmer, to blame the Securities and Exchange Commission for such events. In this regard, Gary Gensler, by insisting on the registration of exchanges in the legal format of a broker, said on January 19, 2022 (29 December 1400) and before the disastrous events of 2022:

I have asked the employees of the organization to review these platforms in terms of investor protection. If trading platforms do not work under the law, users will be at risk this year as well.

Apparently, Gensler’s statement was very close to the truth!

Destruction of interchain bridges

Hacking of inter-chain bridges affected many users.

In the past year, the biggest hack in the digital currency space happened in the field of DeFi with 3.2 billion dollars of stolen assets. The target of most of these cyber-attacks were inter-chain bridges.

North Korean hackers stole $625 million worth of assets from Ronin Bridge on the Axie Infinity platform. It was the biggest crypto heist in history. Binance Bridge also lost $586 million. Of course, this protocol was able to freeze 100 million dollars of this theft in the form of Binance Coin and not allow hackers to transfer it.

Not to mention, Wormhole Bridge platforms lost $325 million, Nomad $190 million, Beanstalk Farms more than $180 million, and Wintermute lost $160 million. Horizon Bridge from the Harmony platform was also attacked by North Korean hackers and said goodbye to its $100 million capital.

The first hack of the year belonged to QBridge from the lending platform Qubit Finance with a loss of 80 million dollars. The statistics we mentioned are related to the heavy hacks of the year, and the list of thefts in 2022 is much longer than these. In the meantime, some projects were able to pay the damages of tens of thousands of affected users; But some other platforms were unable to compensate.

Luna’s eternal sunset

Stablecoin market value Terra Luna Before the beginning of the winter, digital currencies had reached 40 billion dollars from 250 million dollars at the beginning of 2021. In another downward wave, it reached about 30 billion dollars on May 4, 2022 (14 May 2021). However, Terra Luna was still the third largest stable coil on the market.

This stablecoin algorithm uses a two-token mechanism and instead of storing dollars like USDC and Tether, it obtains its one-to-one parity with the dollar by relying on Luna digital currency.

The parity suddenly slipped, causing traders to panic. The Luna token, which controlled the Terra Luna parity and was valued at around $86 on May 4, 2022, was worth less than 17 cents on May 12.

Experts had previously warned about the high risk of algorithmic stablecoins. Do Kwon, the founder of Terra Network, did not pay attention to these criticisms. As a result, when this digital currency fell, even the billion-dollar investment of the Luna Foundation on Bitcoin did not have any special results. It should be mentioned that Du Kovan is currently facing accusations such as embezzlement and cashing billions of dollars before the final collapse of the network and warnings from Interpol.

Terra Luna chart

Bankruptcy of Terry Rose Capital

Following the fall of Terra Luna, many suffered huge losses; But perhaps less companies like Three Arrows Capital have regretted the purchase of Terra Luna so much. In 2012, Zhu Su (Zhu Su) and Kyle Davies (Kyle Davies) founded the hedge fund Three Arrows Capital, and finally, in June 2022 (June 1401), this fund declared bankruptcy.

Heavy investments in Terra Luna and the Bitcoin investment fund Grayscale made Three Arrows Capital unable to survive despite having $18 billion in assets. Grayscale Bitcoin (GBTC) shares, which once traded 10-30% above the original price of Bitcoin due to user adoption, have fallen to 50% below the price of Bitcoin after the collapse of its main investor, Three Arrows Capital.

In addition, investments in the derivative stETH, which had been faltering after the collapse of Terra Luna, accelerated the bankruptcy process of Terry Rose Capital. Currently, the company owes $3 billion to its customers.

Bankruptcy Celsius

On June 13, 2022 (June 23, 1401), one of the big lending platforms named Celsius with 3 million customers, suspended withdrawals from this network.

This platform offered one of the highest profit rates with a profit of more than 18%; An issue that caused concern and warning of the head of the Securities and Exchange Commission.

Alex Mashinsky, the CEO of Celsius, failed to satisfy panicked customers who were looking to withdraw their money with his promise of a harvest.

One of the former employees of this company also sued it, accusing it of “manipulating the digital asset market” with clients’ assets without a clear account. The lawsuit made matters worse for Celsius.

Celsius was finally announced one month later on July 13, 2022 (July 22, 1401). Bankruptcy while it owed $1.2 billion to 300,000 customers. Mashinsky also resigned from his position in September 2022. A few days later, the news that Machinsky and two other top executives had withdrawn $56 million from the company’s account a few weeks before the company’s bankruptcy grabbed the crypto headlines.

The legal case of Sam Benkmanfried and the fall of FTX

Undoubtedly, the most dramatic disaster in the cryptocurrency world in 2022 was the demise of the FTX exchange. In a year that didn’t seem like it could get any worse, the world’s second largest digital currency exchange was reduced to ashes in less than 9 days, making digital currency winter colder and colder.

At the end of the year, it was discovered that the FTX exchange had allocated about 10 billion dollars of its clients’ capital to support its investment company, Alameda Research. The painful part of the story was that 8 billion dollars of this capital was probably lost in transactions.

In the meantime, the extravagances and million-dollar contributions of Sam Benkmanfried, the CEO of FTX, to the two American Democratic and Republican parties to influence the world of politics were also revealed.

Sam Bankmanfried

With the news that Coindesk published on November 2, 2022 (November 11, 1401), questions were raised about the financial corruption of the FTX exchange. According to this news, $5.8 billion of Alameda Trading Company’s $14.6 billion capital was held in the form of native FTX tokens, i.e. FTT.

Only 4 days later, on November 6, 2022 (November 15, 1401), Binance announced in response to this news that it will sell $580 million of its FTT token. This issue caused exchange customers to withdraw 6 billion dollars of their assets within 72 hours; A request that the exchange could not fulfill.

By November 8, 2022 (November 17, 1401), the FTT token lost about three quarters of its value. FTX exchange finally confirmed Bankmanfarid’s bankruptcy and resignation on November 11, 2022 (November 20, 1401). The bankruptcy of the banker’s exchange brought Benkmanfried’s wealth from $15.6 billion on November 7, 2022 (November 16, 1401) to $100,000 in early December!

A few hours after declaring bankruptcy, this exchange was hit by a 500 million dollar hack. Although Benkmanfarid claimed that he did not participate in this hack, he was arrested in the Bahamas on December 12, 2022 (Azer 21, 1401) on charges of money laundering and fraud.

Conclusion

The unfortunate events of 2022 do not end with what you read; Because the conviction and imprisonment of Virgil Griffith, the former developer of Ethereum, for the crime of cooperation with North Korea, the collapse of the “Wonderland DeFi” protocol due to the presence of the co-founder of the bankrupt “QuadrigaCX” exchange, the increase in ransomware activity, the wave Widespread layoffs in major digital currency companies such as Coinbase, Baybit, and Gemina, the official announcement of the end of Facebook’s failed stablecoin project, along with the harsh and cold crypto winter, were just some of the other ominous events this year.

With the financial tsunamis of the past year, it is natural that the digital currency market does not have much hope to grow again at the moment. However, the crypto industry has experienced many ups and downs in its relatively short life, and despite being hit by adversity many times, it has shown the ability to make up for past performance. In fact, no matter how bad and unpleasant the events in this bustling industry are, they are not permanent. Therefore, it is better to have a broader view of what is happening and not to forget that a falling market can often lead to a rising market.

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