The collapse of the FTX exchange towards the end of 2022 resulted in a wipeout of investors’ money worth billions of dollars. Besides that, this unfortunate event led to a huge price fall in the overall cryptocurrency market. Following this event, the reputation of the crypto industry was hit badly, and the impact will take more time to return to its normal state.
Even though the FTX issue started at the beginning of November 2022, the key events that led to the tragic situation in the crypto space started in early 2022. Let’s have a close look at those key dates and events.
Key Events on 2022
February
Crypto platforms like FTX, Coinbase, eToro, and Crypto.com started to run advertisements on Super Bowl to promote the mass adoption of cryptocurrencies starting from 13th February 2022.
Larry David, the American sitcom legend, led the FTX commercials in which he urged people not to miss out on the “next big thing,” crypto.
Bitcoin’s price fell drastically in February, trading around $42,000 after almost touching $69,000 in November 2021. As a result, the crypto industry witnessed massive advertising by spending millions of dollars.
May
On 4th May, the Fed had to raise half-percentage points on the benchmark rate to control the increasing inflation. Following the Fed’s official announcement, the overall market was a massive selloff. Moreover, the price of cryptocurrencies also fell, and the price of Bitcoin fell below its $40,000 price level.
To add more trouble to the bearish crypto market, the price of TerraUSD failed to maintain its value at 1 U.S Dollar on 9th May. As a result, the crypto market saw a massive selloff resulting in Terra USD and LUNA crash.
June
The Luna collapse started to show its negative impact on the crypto industry in June 2022. Popular crypto lending platform Celsius froze its user’s transfers, withdrawals, and swaps on 12th June. Moreover, this platform laid off over 150 employees following the negative market conditions due to Luna’s Impact.
On 17th June, another crypto lending platform, Babel Finance, suspended account withdrawals due to extreme market conditions.
Also, on 27th June, Three Arrows Capital (3AC) was issued a default notice for a massive loan worth around $665 million from a crypto lender, Voyager. 3AC had a large investment in the crashed crypto, TerraUSD.
On 29th June, a British Virgin Islands court ordered 3AC to liquidate the company, which led to the filing of bankruptcy in the following days.
July
On 5th July, Voyager filed for bankruptcy under the “Chapter 11 Bankruptcy” section. Moreover, Celsius also filed for the same bankruptcy section on 13th July.
FTX proposed acquiring Voyager on 28th July but was rejected following the lower bid amount.
The NFT market started falling badly, and crypto companies started massive layoffs resulting in “crypto winter,”; an expression used in the crypto space to mention a bearish cryptocurrency market.
The big names in the crypto industries, like Coinbase, OpenSea, Crypto.com, and Blockchain.com, laid off a substantial number of their staff in July 2022.
November
November 2022 can be considered one of the most disastrous months for crypto since its inception. The FTX and its collapse pushed the crypto market from bad to worse in a few weeks.
Everything started following a CoinDesk article published on 2nd November that mentioned the involvement of Alameda Research in the surge of FTT, the native token of FTX exchange.
Things got worse for FTX and FTT on 6th November as the largest crypto exchange, Binance, sold all of its FTT tokens following the reports. The Binance selloff news created panic among FTT investors. It resulted in a huge selling of FTT tokens across all major crypto platforms.
On 7th November, the FTX exchange announced its liquidity crisis. It started seeking bailouts from various venture capitalists and the Binance exchange.
On 9th November, Binance backed out from acquiring FTX, worsening things. The price of the FTX token crashed to almost zero, wiping out investors’ money worth billions of dollars.
The founder and CEO of FTX exchange, Sam Bankman-Fried, stepped down from the CEO position on 11th November.
On 28th November BlockFi, a crypto lending platform that took $250 million as a loan from the FTX, also declared bankruptcy.
Following the FTX saga, the price of cryptocurrencies had a huge fall, and Bitcoin’s price dropped below $16,000 based on negative market sentiments.
December
On 12th December, Bankman-Fried was arrested by the Bahamas officials for conducting fraudulent activities that led to the collapse of FTX and losing billions of dollars worth of investors’ money. Bankman-Fried’s arrest was following the criminal charges filed by the U.S. prosecutors.
After several legal battles, Bankman-Fried was released on 22nd December against a bond package worth $250 million. He was ordered to surrender his passport and stay at his parent’s home in California.
Key Events on 2023
January
After months of price fall and consolidations, Bitcoin regained positive momentum. The trading price of Bitcoin closed at $16,530.35 on 31st December 2022; however, the price surged as high as $23,966 on 29th January 2023. In short, the Bitcoin price rallied over 44% within a month. This price rally is Bictoin’s best recent rally after October 2021.
Even though the crypto market showed signs of recovery, the issues faced by crypto platforms continued. For example, Gemini and Genesis got sued by the U.S. Securities and Exchange Commission for the violation of investor protection laws.
On 18th January CoinDesk, one of the top crypto media platforms explored their opportunities for a potential sale. They hired investment bankers to find the best offers for a full or partial sale.
On 19th January, Genesis filed for Chapter 11 Bankruptcy. The new CEO of FTX, John J. Ray, informed the media about the possibility of recovering the exchange to return the money of investors and creditors.
February
The SEC on 15th February, proposed a rule that makes things difficult for asset managers to park investors’ money in crypto assets.
On 16th February, Do Kwon, the former CEO and founder of Luna was charged by the SEC for misleading investors. The crash of the tokens LUNA and TerraUSD wiped out billions of investors’ money in May 2022. The current location of Kwon is still unknown, and he is facing multiple lawsuits for the operations he conducted while serving as the CEO of the Luna project.
The federal prosecutors filed Sam Bankman-Fried with additional criminal charges on 23rd February. These charges are based on the fraudulent conduct that led to the collapse of the FTX exchange and FTT tokens.
On 28th February, Nishad Singh, the co-founder of FTX, pleaded guilty to the charges against him for his involvement in the FTX issue. He agreed to cooperate with government officials to provide statements against Bankman-Fried.
Final Thoughts
2022 was one of the worst years for the crypto industry that followed the collapse of Luna, FTX, and other major crypto platforms. The series of failed crypto projects and the decline in NFT market demand resulted in the creation of crypto winter during mid-2022.
The panic in mid and late 2022 also made way for a fall in the price of cryptocurrencies. However, the crypto market showed signs of recovery from the beginning of 2023. Bitcoin itself rallied over 50% within 2 months this year. The crypto industry is in its recovery phase. It is expected to gain its previous momentum in the months to come.
Abhijith is a crypto and blockchain writer with a bachelor's in electronics engineering. He is also interested in crypto technical analysis. Aside from writing and technical analysis, Abhijith enjoys hiking and traveling.
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