5 Shocking Crypto World Events That Rattled the Industry!

Despite its rather short history, the

cryptocurrency

industry has gone through some real shockers. Here are some examples.

In the dynamic world of cryptocurrencies, where innovation and volatility often go hand in hand, certain events have the power to send shockwaves through the entire industry. From groundbreaking partnerships to catastrophic crashes, the crypto realm has witnessed its fair share of astonishing moments that have left investors, enthusiasts, and skeptics alike in awe.

In this article, well take a walk through memory lane, reviewing 5 extraordinary events that have not only reshaped the landscape of digital currencies but have also left an unforgettable mark on the collective consciousness of the crypto world.

1, March 2020: Covid Crash

For years, Bitcoin was described as a safe-haven asset and a hedge against inflation, earning the nickname “digital gold” from its enthusiasts. However, in 2020, the perception of the asset as a secure refuge was severely diminished when it fell short of expectations.

The year commenced on an optimistic trajectory, with Bitcoin trading at $7,000. Within a mere six weeks, the digital asset skyrocketed to $10,000. Then, the COVID-19 pandemic struck, catching crypto investors off guard and profoundly impacting the crypto market and the global financial landscape.

Bitcoin‘s price swiftly plummeted, sinking below $4,000 within hours. Market analysts attributed this volatile price movement primarily to the influence of the COVID-19 outbreak on global markets, which compelled investors to seek the safety of cash. The sharp decline raised doubts regarding Bitcoin’s potential as a reliable safe-haven asset.

2, March 2021: Beeple $69M NFT

In 2021, the NFT market emerged as a prominent sector within the digital asset industry, capturing widespread attention. Although non-fungible tokens came into existence in 2014, their popularity soared in 2021, coinciding with the bull market. NFTs quickly transitioned from a relatively unknown niche to a mainstream phenomenon, significantly increasing awareness of digital asset ownership.

However, nobody could have anticipated that a digital artwork would fetch a staggering $69 million. But that is exactly what happened with Beeples record-breaking $69 million NFT auction.

Before Q4 2020, the highest sum Mike Winkleman, also known as Beeple, had ever received for his artwork was a mere $100. Beeple introduced his first NFT series to the market in October 2020, with each pair selling for over $66,000. Through a series of subsequent NFT auctions, Beeple established a notable presence in the NFT market, leading up to the largest such sale to date.

The auction took place at Christie‘s, a renowned auction house with a 257-year history of selling some of the world’s most famous artworks, including the only known portrait of Shakespeare and the last-discovered painting by Leonardo da Vinci. The event garnered immense attention from crypto and non-crypto investors, particularly as it marked Christies inaugural digital-only art auction.

Beeple‘s NFT, titled “Every day: The First 5000 Days,” encompasses a collection of his work spanning 13 years, capturing the evolution of his artistic career. Following a two-week-long auction, Beeple’s NFT fetched an astonishing $69.3 million, firmly establishing him as one of the top three most valuable living artists.

Everyday: The First 5000 Days by Beeple. Source: Christies

3, June 2021: El Salvador BTC Legal Tender

On June 9, 2021, El Salvador, a small Central American nation, made a historic decision as President Nayib Bukele declared the adoption of Bitcoin as legal tender. The groundbreaking decision marked the first time Bitcoin gained recognition as an official currency.

At a time when many countries were tightening their regulations on the industry, including China‘s complete ban on crypto operations, El Salvador’s move garnered significant attention. Enacting the Bitcoin Law provided various advantages for crypto businesses and investors, such as exemption from capital gains tax on BTC due to its legal tender status.

But the decision faced opposition from global financial organizations and economic experts. The International Monetary Fund (IMF) urged El Salvador to remove Bitcoin as a legal tender. At the same time, the World Bank expressed concerns over environmental impact and transparency issues and declined to assist with the implementation.

Undeterred, President Bukele announced plans to utilize the countrys renewable geothermal energy for Bitcoin mining and encouraged local companies to adopt BTC for salary payments.

In September 2021, El Salvador made history again by becoming the first country to purchase Bitcoin, acquiring an initial 200 BTC. This marked the beginning of the nation‘s entry into the crypto market, with more purchases following suit. El Salvador currently holds over 2,380 BTC, maintaining unwavering confidence in the asset’s future despite its significant price fluctuations.

President Nayib Bukele

4, May 2022: DoKwon/Terra Collapse

Stablecoins have often been considered a safer choice in the digital asset space due to their relatively stable prices. However, that notion was shattered in the Terra ecosystem, exposing the risks involved.

Terra is a blockchain protocol that leverages algorithmic stablecoins to create a payment network. At its peak, Terra provided investors with fully stable prices through the relationship between its native token, LUNA, and the popular dollar-pegged stablecoin within its ecosystem, UST.

Instead of relying on reserve assets, LUNA maintained price stability for UST through a smart contract-based algorithm. The algorithm utilized arbitrage trading to uphold prices, allowing users to seamlessly exchange LUNA for UST at a 1:1 ratio, regardless of the tokens market prices.

When demand for UST surged, driving its price above $1, LUNA holders could swiftly swap their tokens to mint one UST and profit from the price difference. During the token swap, a portion of LUNA was burned, reducing UST demand and increasing its supply. This mechanism restored USTs market price to $1. In contrast, when UST demand waned and prices dropped below $1, holders could exchange UST for LUNA, which held a higher value.

Trouble began for the Terra ecosystem when an anonymous wallet dumped over $500 million worth of UST. Whether this action stemmed from market volatility or a malicious attack on Terra‘s system remains unknown. In an attempt to rescue UST, the Luna Foundation Guard (LFG), an organization responsible for building reserves, emptied its Bitcoin reserve to support the stablecoin’s peg during volatile market conditions.

However, these efforts failed to prevent the collapse of the stablecoin. As UST lost its peg, investors rushed to sell, causing LUNA to shed 99.9% of its value.

The damage inflicted by the crash extended beyond the Terra ecosystem, as the event exacerbated the prevailing bearish market sentiment, dragging down the entire crypto market. The Terra UST collapse wiped out over $26 billion from the stablecoin market and more than $700 billion from the broader crypto sector.

Even before the UST crash, numerous analysts cautioned investors about the risks of Terras mechanism, and they were quick to assert their earlier concerns when the Terra ecosystem crumbled.

The project‘s founders became targets of industry scrutiny. In the aftermath of Terra’s catastrophic failure, Korean investors initiated legal actions against the co-founders, filing criminal and civil lawsuits while seeking to seize the assets of Terras Do Kwon.

The South Korean government summoned Kwon to give accounts of the collapse of both LUNA and UST. The authorities also called upon executives from local crypto exchanges to explain their actions during USTs de-pegging.

Kwon is currently facing document forgery charges in Montenegro, where he was arrested while on the run.

5, November 2022: SBF/FTX Failure

November 2022 marked the downfall of Sam Bankman-Fried (SBF) and his bankrupt

crypto exchange

, FTX. SBF had been hailed as a key figure in driving mainstream adoption and a crypto champion within and beyond the industry. As FTX grew, the 31-year-old entrepreneur became synonymous with the company, gaining prominence in the crypto world.

Founded in 2019, FTX rapidly gained international recognition through aggressive marketing tactics and attractive trading fees, luring crypto and non-crypto users. The exchange promised substantial returns on digital asset holdings, surpassing traditional banking offerings. FTXs Super Bowl ads, celebrity endorsements, and arena naming rights with the Miami Heat made them hard to ignore.

FTX and SBF aimed to solidify their dominance by acquiring high-profile companies like Blockfolio, LedgerX, and Liquid Global. With almost $2 billion in investments from venture capital firms, FTXs valuation reached $32 billion by January 2022, and the company was ranked as the third largest crypto exchange in the industry.

To further strengthen his company‘s dominance in the space, SBF became Crypto’s White Knight by rescuing numerous firms impacted by the first wave of the bear market, which stemmed from the Terra-Luna crash.

As the CEO of FTX, SBF played a pivotal role in supporting and revitalizing struggling companies within the crypto industry. His intervention provided a lifeline to these firms during a challenging period characterized by plummeting prices and market uncertainty. SBFs efforts were widely recognized and celebrated, positioning him as a prominent figure in driving the industry forward.

However, in the first two weeks of November, FTX and its founder lost their shine as the third-largest crypto exchange collapsed. Trouble started when a CoinDesk report revealed that FTX‘s sister trading house Alameda Research was in a dire financial condition. The publication also unveiled a major fraud that caused the loss of billions of dollars in investors’ assets.

Alameda‘s balance sheet, composed mainly of FTX’s FTT token and Solana‘s SOL token, disclosed $9 billion in liabilities, $900 million in assets, and poorly labeled records revealing an $8 billion negative balance. Investigations uncovered FTX’s diversion of investors funds to other investments using FTT as collateral through Alameda.

FTX and its affiliated companies lacked transparency, neglecting standard financial reporting practices that disclose assets and liabilities. This made it difficult to ascertain the companys funds and their allocation.

Upon learning the news, Binance‘s CEO, Changpeng Zhao, announced plans to sell his company’s FTT holdings worth over $500 million. The announcement triggered panic selling, rendering the FTT token practically worthless. FTX then suspended all withdrawals on its platform, causing shockwaves throughout the market.

Initially, CZ offered to assist FTX and prevent a broader market crash. However, the deal fell through due to a closer examination of FTXs balance sheet and further reports of mishandled customer funds.

The collapse of FTX had a cascading effect on the entire industry, particularly affecting crypto firms associated with it. Numerous companies, such as BlockFi, with significant exposure to FTX, had to halt withdrawals following the overwhelming number of users requests. Most of these firms eventually filed for bankruptcy protection.

Major FTX investors, including CoinShares, Galaxy Digital, BlackRock, and others, wrote off millions of dollars in losses. Several projects that FTX had invested in also suffered significant treasury shortfalls.

Unable to secure a lifeline, FTX initiated bankruptcy proceedings, leading to SBF stepping down as CEO. John J. Ray III, FTXs new CEO, described the collapse as a “complete failure of corporate control” unprecedented in his experience managing the aftermath of major corporate failures.

Criminal charges and lawsuits flooded in, including a class-action lawsuit filed by FTX investors on November 15 against FTX and its celebrity endorsers, including Naomi Osaka and Tom Brady. The lawsuit alleged “false representation and deceptive conduct.”

SBF was arrested in the Bahamas on December 12, extradited to the United States, and released on a $250 million bond. He faces multiple criminal charges, including money laundering, wire fraud, campaign finance violations, and securities fraud.

Due to the numerous lawsuits against FTX, several partners, including the Miami Heat, terminated their agreements with the exchange.

The FTX saga also prompted increased scrutiny of the crypto industry by global financial regulators. The UK government announced plans to implement stringent regulations for the industry in response to the collapse of FTX.

As of April 2023, FTX had managed to recover more than $7 billion in lost customer assets. The funds are now set to be distributed among the affected clients, numbering over 150,000.

Despite the significant losses and the tarnished reputation of SBF and FTX, efforts are underway to restore stability and trust within the crypto industry, aiming to prevent similar incidents in the future.

Conclusion

While most of these events harmed the broader crypto market, it is worth noting that the industry has always found a way to bounce back, better than before, with great lessons to learn.

Furthermore, most of these events serve as a cautionary tale, highlighting the need for transparency, responsible financial practices, and regulatory compliance as the crypto market matures.

As we enter a new phase of growth in preparation for the next bull run, the market will be better prepared to navigate similar situations.

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