The hyped domain for 2022 and much talked about the crypto market, there seemed to be no shortage of high-profile bankruptcies and scandals that roiled the crypto sphere. Among all, we shall be highlighting the top 5 implosions of the crypto and give a snapshot as to whether the crypto market would be able to recover or not. They are-
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TerraUSD/Luna
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Celsius Network
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Voyager Digital
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FTX
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BlockFi
TerraUSD/Luna
Luna crash burst the bubble and made the first fall of the crypto market for 2022.TerraUSD was a famous “algorithmic stablecoin” that was pegged to the U.S. dollar and acted as an arbitrage mechanism to protect the peg. This meant, Luna will be absorbing any volatility that TerraUSD would experience. Earlier the happy-to-go coin suddenly started experiencing a downfall in May 2022. As a result, TerraUSD de-pegged itself from the American currency followed by mass withdrawals from Anchor, a yield-paying lending and borrowing procedure. Soon after, we could not believe our eyes to see the token plunging as low as 10 cents on the dollar while Luna incurred an eventual 99% loss in its total value.
Celsius Network
Established in 2017, Celsius rode the cryptocurrency downfall in 2021 to become one of the most prominent crypto lenders. Its competitive yields attracted many investors and low-interest rates on crypto-backed loans. It all started in June 2022 when the company began suffering liquidity issues by eventually halting all withdrawals and the customer assets were frozen by June 13. A month later, it filed for its bankruptcy, having just $167 million in cash compared with $4.7 billion owed to its creditors.
Voyager Digital
The publicly traded Voyager Digital toppled on July 1 when the platform suddenly halted customers trading. Investors fears materialized on July 5, and filing for Chapter 11 bankruptcy was made. Shares experienced a mountain fall from 31 cents per share to 10 cents in Sept 2022 and are being traded at just $0.035 per share as of 13th Dec 2022, which once had a 52-week high of $15.87. As per the news, Binance the most renowned exchange is re-launching Voyager Digital with its turnkey solutions to trade crypto assets.
FTX
Founded by Sam Bankman-Fried in 2018 FTX, one of the prominent crypto brokerage platforms globally, is being called the “Lehman Brothers of Crypto” due to its recent crash.
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In its earlier days of the 2022 crypto bear scenario, FTX emerged as a “lender of last resort” in the crypto domain, engaging in talks with and extending credit to belay troubled companies like Celsius, Voyager, and BlockFi alike. It was no less than a shock for everyone when FTX paused its withdrawals from Nov. 9 and filed for Chapter 11 bankruptcy. So, what could be the reason for the catastrophe?
The reason behind this was a bank run on FTX following revelations that the assets held by Alameda Research, a crypto trading firm owned by Bankman-Fried, were actually composed of FTX’s own token, called FTT. Shortly afterward, Binance dumped its FTT holdings, inciting a spike in withdrawals and creating a liquidity crisis that FTX was unable to recover. Unsealed on 13th December 2022, the DOJ indictment accused “SBF” of a conspiration to defraud FTX clients by misappropriating their deposits to pay debts and expenses of Alameda, among other grievances.
BlockFi
We can quote this as a contagion fall from FTX spread in mid-November. The crypto lender BlockFi began freezing its withdrawals from 10th November 2022 onwards, after a fortnight Chapter 11 bankruptcy filing was made.
Just before its breakdown, FTX signed a deal to purchase BlockFi for $240 million along with extending it a $400 million revolver loan. After FTX’s crash, the obvious thing was BlockFi strapping for liquidity and obligations. In its bankruptcy filings, BlockFi outlined significant exposure to FTX, in addition to being owed amounts from Alameda, it had an outstanding loan amount of $275 million towards FTX.US and noted that it had over 100,000 creditors.
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