A year from the top to the bottom of cryptocurrency

The cryptocurrency market lost more than $2 trillion in value after Bitcoin peaked at $68,000 this week of November 2021.

Over a year ago, experts and investors were still describing Bitcoin as the future of money, and Ethereum as the world's most important development tool. NFT boomed, while Coinbase transactions kept setting records.

Twelve months later, the world's two largest cryptocurrencies have lost three-quarters of their value. The industry that was once worth $3 trillion is now only about $900 billion. Instead of being seen as a countermeasure to inflation, Bitcoin becomes a speculative asset that inflates during peak periods and plummets when investors panic.

The coins illustrate some popular cryptocurrencies. Photo: Reuters

In just a few days, the world's third largest cryptocurrency exchange FTX , one of the largest empires in the cryptocurrency market with a value of $ 32 billion, collapsed and had to file for bankruptcy FTX founder Sam Bankman-Fried from the world's second-richest billionaire, the cryptocurrency went empty-handed, admitted to making many mistakes and resigned as CEO.

"Looking back, the excitement and asset values ​​have clearly been pushed too high compared to the real value. The plunge was so fast that many people declared digital assets dead," said Katie Talati, Research director at investment firm Arca, commented.

No one can say for sure if the crypto sector will recover, but the year-long plunge has exposed the sector's weakness and reminded investors of why regulations should exist. financial control. A series of bankruptcies have occurred in the past months, from Terra/Luna, Voyager Digital to FTX, leaving crypto holders unable to access their accounts, with no way to recover their investment.

"We seem to be stuck in a tangled relationship with cryptocurrencies and want to get out. It's time for the industry to mature and embrace regulation. The future of the industry is for assets to be registered and traded on the internet. regulated exchanges where everyone is protected," said Michael Saylor, President of MicroStrategy , a technology company that owns 130,000 Bitcoins.

Bitcoin value fell to a two-year low, at $15.7k. Ethereum and Solana fell into a similar situation, while assets tied to cryptocurrencies also depreciated. Coinbase exchange last week announced a 50% decrease in revenue in the third quarter of 2022 compared to the same period last year, a loss of $ 545 million. They had to lay off 18% of employees in June.

The decline in cryptocurrencies began at the end of 2021 as inflation rose and people looked to safer assets. The sell-off continued since January, causing Bitcoin to lose another 17% of its value and Ethereum by 26%. David Marcus, former Head of Crypto at Meta, commented on January 24: "During crypto winter, the best entrepreneurs build better companies. It's time to focus on solving problems. actually, instead of pumping tokens".

But the crypto winter did not happen immediately, the market even stabilized again. It was not until May that the shock occurred when UST and Luna lost value, causing users to panic. More than 40 billion USD of assets were wiped out when Luna collapsed, many people lost faith in cryptocurrencies.

The Celsius platform went bust in the middle of this year. Photo: Reuters

The Luna crash left Bitcoin with less than half its value six months earlier. The Celsius platform suspends withdrawals because of "extreme market conditions". The exchange Binance also made the same decision, while BlockFi cut its workforce by 20%. Bitcoin had a bad month when it lost 38% of its value, while Ethereum also plunged more than 40%.

Followed by a series of bankruptcies.

3AC, one of the largest cryptocurrency investment funds in the world and once under management of $10 billion in assets, filed for bankruptcy in Manhattan federal court on July 1 due to its inability to pay its debts due to bankruptcy. money into Luna and UST. This move directly impacted the market and caused the cryptocurrency crisis to spread further. After 3AC came the turn of cryptocurrency brokers Voyager Digital and Celsius.

At that time, Sam Bankman-Fried was considered the savior of the cryptocurrency industry, when he decided to spend billions of dollars to save companies in decline. However, the decline of FTX also started here because the deals made through its subsidiary Alameda Research all lost.

Recognizing the instability and as a "necessary risk management step", on January 7, Binance CEO Changpeng Zhao confirmed the liquidation of all FTX tokens. This triggered massive sell-offs, pushing the token price from $22 to just $3 overnight.

After declaring bankruptcy on the evening of 11/11, Bankman-Fried turned from a savior to a criminal and faced a prison sentence. Ryan Gilbert, founder of venture capital firm Launchpad Capital, believes that the crypto world is experiencing a severe crisis of confidence following the FTX shock. In a market without central banks and guarantees, trust is the most important factor.

"The question is whether trust in cryptocurrencies survives at this stage. The concept of trust is collapsing like the collapse of a series of crypto companies over time," he said.