WRAPPED 2022
The Biggest Crypto Events Of The Year Recapped
Happy New Year Knights!
We started this newsletter back in April to help educate people on the innovative real use-case of blockchain through on-chain real estate.
The year saw billions wiped off, bringing the heavyweights and dominoes down. The crypto market capitalization ($840 billion) has reduced to more than a third of what it was last November ($3 trillion). Bitcoin has diminished from its all-time high of $60K to $17K. The hope of mass adoption and acceptance is not what the crypto community would have wanted it to be.
FOMO has turned into fear, interest rates are rising, and risk appetite is dissipating while the corporates are collapsing. All that is seen are more curbs and crackdowns. The wounds inflicted by Terra & FTX are yet to mature.
Increased attacks, price manipulations, bankruptcies, layoffs, market crashes, and decreased investments mark the crypto calendar of 2022. As a result, some have labeled it the worst year in the history of cryptocurrencies.
Does it mean all gloom and doom?
With the year closing out, let's talk about some of the most consequential events in the last 365-odd days.
🎇 2022 IN RECAP
Writer, Editor: EverythingBlockchain, Cheetah
Hacks (Smart contract & Governance)
The experimental field of decentralized finance (DeFi) is home to hackers and malicious actors too. The string of hacks in 2022 has undermined confidence in crypto and made an already brutal bear market more challenging to wither. Chainalysis in October claimed 2022 to be "the biggest year ever for hacking."
The largest attack in 2022 occurred in March when North Korean-linked Lazarus Group expropriated about $620 million in ETH and USDC from the Ronin Network.
In April, a notable attack was carried out on Beanstalk's governance (an Ethereum-based stablecoin protocol). The entire attack was based on a vulnerability that enabled the attacker to exploit the protocol's majority vote governance system. The attacker utilized a flash loan to garner just enough collateral to become a supermajority, pass a BIP (Beanstalk Improvement Proposal) and swindle $182 m from Beanstalk farms.
Thieves exploited a coding issue leading to a loss of 190 million from Nomad bridge in August.
Wintermute was hit for $160 million in September when its DeFi division was hacked.
Hackers even managed to hit the BNB network associated with Binance, the world's biggest crypto exchange, for $100 million in October.
Do Kwon - Hold Steady Lads (But it only kept crashing)
Terra was touted as one of the hottest investments of 2021. LUNA reached a record high of $119 in April 2022 & UST became one of the largest decentralized stablecoins.
However, a novel attack on the pegging mechanism of Terra/Luna resulted in a death spiral and a loss exceeding $42 billion. The shockwave exacerbated, putting the whole crypto market in a frenzy. On a single day on May 12, the LUNA price fell by almost 96 percent to less than 10 cents. If anything, it showed that no single institution was big enough to fall.
It saw a majority of tokens, including Bitcoin plummeting by over half by the end of May. Bitcoin fell over 15%, its worst day since March 2020 on a single day in June.
Do Kwon is since wanted by South Korean Authorities & suspected of being in hiding in Serbia.
Deck of Cards Comes Crashing Down
Losing $42 billion brought down some of the most well-known and reputed institutions like a deck of cards.
Singapore-based crypto hedge fund Three Arrows Capital (3AC) went bust in June. It had invested client funds pretty heavily into Terra's Anchor Protocol.
US-based crypto lending platform Celsius froze customer assets and declared bankruptcy the same month, revealing a $1.2 billion hole.
Voyager, a New Jersey-based crypto lender had to file for bankruptcy in July because of its exposure to Terra through 3AC. The inability of 3AC to repay a $670 million loan became the catalyst for its fall. In September, Voyager reached an agreement with FTX to sell its assets in crypto for $1.4 billion. However, that never went through due to FTX's breakdown, and Voyager has since been in talks with other potential buyers, including Binance.
US Bans Tornado Cash
U.S. Treasury's Office of Foreign Assets Control (OFAC) imposed sanctions on Tornado Cash and deemed it a tool for money laundering. The Netherlands' Fiscal Information and Investigation Service soon arrested Alexey Pertsev, Tornado Cash's core developer.
Exchanges ended up blacklisting wallets that had interacted with Tornado Cash. The incident was the first of its kind where an open-source code was sanctioned instead of a platform. This was not just an attack on Web3 privacy but brought to the fore the bigger question of the ability of the blockchain industry to withstand such censorship from institutions.
FTX Sage (More billions lost)
What most crypto folks thought was the end of the suffering saw one of the most consequential blows that crypto had ever seen.
FTX, the third largest crypto exchange, crashed, evaporating billions. Bitcoin lost a quarter of its value in less than four days as SBF started speaking DoKwon's language.
It is a watershed event that has shaken the trust of every investor, retail and institutional alike. Yet, with new revelations emerging each day, the effects are far from over.
FTX lent client funds to Alameda research & Alameda used those funds for trading. As the markets crashed, it couldn't pay back the funds, eventually leading to a bank-run-style crash.
The contagion from the FTX implosion soon engulfed BlockFi, which had significant exposure to FTX. In addition, the customer assets held on FTX (thanks to a previous deal between FTX & BlockFi) were inaccessible besides the amount Alameda owed.
In no time, the effects were far & deep.
Sum up some Positives
Even though 2022 has been dark for crypto, it can't be all doom. Unfortunately, the world chooses drama & sensationalism rather than progression and innovation.
Twitter launched NFT integrations and ETH tipping at the start of the year. Instagram started supporting NFTs on Ethereum, Flow & Polygon in May.
Popular influencers & personalities were called out, and authorities even fined some for promoting pump-and-dump projects. For example, Kim Kardashian was fined $1.26m by the SEC. Hopefully, this will bring in some accountability for con artists/influencers to not just throw anything at their followers.
As unfortunate as it is, Russia- Ukraine war proved to demonstrate the need and benefits of blockchain technology and cryptocurrencies. Ukrainian government asked for donations in cryptocurrencies for their financial needs, thus leveling the playing field for the underserved communities.
The development of blockchains and Web3 applications is stronger than ever. Ethereum pulled off a mega upgrade moving from an energy-intensive Proof-of-Work to a less energy-intensive Proof-of-Stake model.
The year also saw several popular brands, like Balenciaga, Chipotle, Emirates, and Shopify, accept crypto payments & join the likes of Starbucks, Home Depot, AT&T, and Pizza Hut. In addition, many brands forayed into NFTs, launching their first collection.
In November, JP Morgan, the global leader in financial services, completed its first live cross-border DeFi transaction on Polygon.
Warner Music and Starbucks are set to make investments toward the emergence of Metaverse.
So not everything about 2022 has been gloomy. The year might have been a brutal blow and pummeled crypto, but the race is on, and the game is far from finished. There is light at the end of the tunnel. We are down, but we are far from out.
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🎉 HAPPY NEW YEAR! 🎉
🏆 May the $KNIGHT moon soon to come! 🏆 We wish our Knights a year with sustainable yield and constant liquidity.
