Looking back at 2022, we can agree it was a most turbulent year for the crypto industry with one of the worst bear markets in history, and with it came the collapse of major projects within the space. This series of black swan events made the crypto market unstable, making trust almost impossible. Even though some amazing developments have been made, like the rise of DeFi and the launch of Ethereum 2.0, the outstanding failures cannot be ignored.
Many crypto projects folded up throughout 2022 largely because of bankruptcy, but we will only discuss those that crashed during the fourth quarter.
FTX
FTX is a prominent exchange, a top-five exchange by trading volume, and even the world’s second-largest exchange platform became bankrupt and couldn’t fulfil customers’ withdrawals in Nov. 2022. This collapse was due to money mismanagement and lack of liquidity, resulting in withdrawals from many frightened investors.
Reports that Alameda researches a crypto trading firm with close ties to FTX had over $8 billion in liabilities. Most of its equity in FTT (FTX’s native token) prompted Binance, the world’s largest exchange, to sell off its holdings, bringing the token’s price low. This caused a panic, and users rushed to withdraw about $6 billion from FTX in over 72 hours.
Binance moved to acquire FTX in November but decided to pull out after a proper investigation which showed that FTX owed over 1 million creditors with a total deposit of $9 billion. On November 11, an alleged hack took over $600 million from FTX wallets. It filed for chapter 11 bankruptcy on November 11, one week after it failed to merge with Binance.
SALT
Salt is a crypto lender. Salt halted its deposits and withdrawals during the fourth quarter of 2022. They blamed their withdrawal halt on FTX and announced their pause on November 15, a couple of days after FTX filed for bankruptcy. CEO Shawn Owen announced to customers the withdrawal halt but never made it clear how FTX impacted SALT.
BlockFi
The cryptocurrency exchange filed for chapter 11 bankruptcy on November 28 2022, following the fall of FTX earlier that month. BlockFi announced it had about $257 million cash in hand and owed about #1.3 billion to its 50 largest creditors. BlockFi reported owing 275 million dollars to FTX US. They also showed over 100,000 creditors with assets and liabilities ranging from $1 billion to about $10 billion.
BlockFi’s biggest creditor–Ankura Trust, is owed over $729 million, and the SEC (Securities and Exchange Commission) is also owed $30 million, making matters worse for them.
Compute North
Crypto miner Compute North was among the projects that took the hit. They filed for chapter 11 bankruptcy on September 23 2022, owing over $500 million to about 200 creditors.
The project, which has mining facilities and hardware, a BTC mining pool and a hosting service, blamed the issue on the effects of the crypto winter and the rising cost of power in Texas.
Freeway
Freeway, a crypto-staking platform, halted withdrawals on October 23 2022, saying that one of its trading strategies had failed and resulted in a tangible loss due to the unprecedented U.S. dollar rise and market volatility. The staking platform was known for offering investors returns of over 43% on its supercharger product.
Their strategy for recovery is to bring on board new management for its surviving funds while running four recovery plans simultaneously.
Conclusion
The cryptocurrency industry has been through ups and downs in the past few years, and even though the industry has made lots of progress in the last few years, 2022 was particularly turbulent. The industry has faced many challenges in the past months, from hacking scandals to regulatory issues to money management. As investor sentiment improves, there is hope, and the crypto market always bounces back from previous bear markets.
Only time will tell what’s next for the crypto market, but almost certainly, the happenings of 2022 will pave a new path for new projects that will learn from the mistakes of past fallen projects.
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Disclaimer: “None of Oak’s articles is financial advice” The article is only for educational purposes. Oak has no relationship to these projects. The information provided here is no advice, investment, or trading recommendation. We do not take responsibility for any of your decisions. Please make sure to seek professional advice before taking financial risks.
