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7 biggest crypto collapses of 2022 the industry would like to forget

A look at some of the biggest disappointments in the crypto space form this year as the industry readies itself for better things to come.



A look at some of the biggest disappointments in the crypto space form this year as the industry readies itself for better things to come.

2022 has been a bumpy year for the cryptocurrency market, with one of the worst bear markets on record and the downfall of some major platforms within the space. The global economy is beginning to feel the consequences of the pandemic, and clearly, this has had an influence on the crypto industry.

Below is a breakdown of some of the biggest disappointments in the crypto space this year.

Axie Infinity’s Ronin Bridge hacked

In March of this year, Ronin, the blockchain network that runs the popular nonfungible token (NFT) crypto game Axie Infinity, was hacked for $625 million. The hacker took 173,600 Ether (ETH) and 25.5 million USD Coin (USDC) from the Ronin bridge in two transactions.

When the Lazarus Group started its attack, five of the nine private keys for the Ronin Network’s cross-chain bridge were hacked. With this vote, they authorized two withdrawals totaling $25.5 million in USDC and 173,600 ETH.

According to the Ronin group, Axie Infinity’s issues began in November 2021, when its user base had expanded to an untenable size. Consequently, the corporation’s safety rules had to be relaxed to fulfill client demand. After the initial phase of fast development was completed, the firm reduced its safety procedures.

The main difficulty was a lack of a suitably decentralized network created by game developer Sky Mavis. The hacker acquired access to the private keys of five of Sky Mavis’ Ronin Chain’s nine validator nodes, enabling them to compromise the network. When the hackers gained control of five nodes, they essentially controlled over half of the network and were free to accept or deny whatever transactions they wanted. They obtained ETH and USDC via falsifying withdrawals.

The crime occurred on March 23, but it was only noticed on March 29, when a user reported being unable to withdraw 5,000 ETH from the Ronin bridge ATM. In the aftermath of the attack, Axie Infinity developers raised $150 million to reimburse the affected users.

TerraUSD/LUNA collapse

On May 7, when over $2 billion in TerraUSD (UST) was unstaked (removed from the Anchor Protocol), hundreds of millions of United States dollars were quickly liquidated. It’s unclear if this was a deliberate attack on the Terra blockchain or a response to rising interest rates. Because of the enormous outflow of cash, the price of UST fell from $1 to $0.91. As a result, market players started trading $0.90 in UST for $1 in Terra (LUNA).

When a considerable amount of UST was moved out, the stablecoin depegged. The availability of LUNA increased as more people sold their UST during the panic.

Following this fall, cryptocurrency marketplaces started to suspend trading pairs such as LUNA and UST. Following the initial accident in May, Do Kwon disclosed a rehabilitation plan for LUNA, and things seemed to improve. However, the currency’s value eventually fell. It was abandoned almost as soon as it began. Finally, Terra launched a whole new currency known as LUNA 2.0.

Investors lost a combined $60 billion due to the panic selling that accompanied the decline of TerraUSD Classic (USTC) and Luna Classic (LUNC), a related token.

On Sept. 14, a South Korean court issued an arrest warrant for Do Kwon. This happened four months after Terraform Labs’ LUNA and UST tokens collapsed. Do Kwon and five others were detained for allegedly violating regional market restrictions.

Three Arrows Capital collapse

When LUNA and Terra collapsed, the crypto hedge fund Three Arrows Capital (3AC), which had a peak market valuation of more than $560 million, suffered significantly. 3AC had invested heavily in several troubled cryptocurrency projects, including the play-to-earn game Axie Infinity, which lost $625 million to a North Korean hack this year, and the centralized cryptocurrency exchange BlockFi, which laid off hundreds of employees in mid-June.

The UST collapse shattered investor confidence and expedited the slide of cryptocurrencies, which was already underway as part of a bigger flight from risk. A flood of margin calls from 3AC’s lenders sought repayment, but the firm lacked the funds to meet the requests. In addition, many of the company’s counterparties could not meet their investors’ expectations, many of whom were retail investors promised 20% annual returns.

Related: Santas and Grinches: The heroes and villains of 2022

The crypto hedge fund eventually collapsed after taking on major directional trades and borrowing from over 20 institutions, and the founders defaulted on its payments.

Because the founders would not appear in court, the lawsuit proceeded without them. In a leaked court document filed with the Singapore High Court, the Singapore government was asked to accept liquidation proceedings and work with liquidators. As liquidators try to wind down the failed crypto business of Three Arrows Capital, U.S. Bankruptcy Judge Martin Glenn has issued subpoenas to the company’s founders.

Voyager Digital’s fall

On July 6, prominent cryptocurrency investment firm Voyager Digital filed for bankruptcy after crypto hedge fund 3AC defaulted on a $650 million loan. 3AC received a significant loan from Voyager with no security. When 3AC defaulted on all of its obligations and its owners left, Voyager lost a significant sum of customer money.

Trading, withdrawals, and deposits were all suspended when Voyager reported that 3AC would not repay its loan. In June, Sam Bankman-Fried, billionaire CEO of trading firms FTX and Alameda Research, presented Voyager with a $500 million line of credit to help them weather the market collapse.

On July 5, 2022, Voyager Digital Holdings filed for bankruptcy in the Southern District of New York. According to Voyager Digital, the corporation owes between $1 billion and $10 billion to its more than 100,000 debtors. Despite its debts, however, the company believes it has assets worth between $1 and $10 billion. They also guarantee that adequate money is available to pay off the company’s unsecured creditors.

In a September court filing, insolvent cryptocurrency broker Voyager Digital revealed that it would auction off its remaining assets.

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Celsius crash and liquidity crisis

Celsius’s value plummeted on July 13, 2022, when one of the main crypto businesses, Celsius Network, declared bankruptcy. As the price of cryptocurrencies fell, investors on the Celsius network started withdrawing their Bitcoin (BTC) holdings in search of safer alternatives.

Consequently, panicked investors left Celsius in volume. Despite stating they were forced to do so due to “extreme market conditions,” Celsius Network halted BTC withdrawals, swaps and transfers on June 12. Users of the site understandably thought that Celsius had declared bankruptcy and would be unable to refund their money. The value of the Celsius cryptocurrency plummeted by 70% in only a few hours and fell further in the days that followed.

The crypto market has seen a significant sell-off due to the insecurity and falling prices of many major cryptocurrencies, which corresponded with the drop in the price of Celsius. In addition, due to escalating cash flow issues, Celsius announced 23% layoffs on July 3, 2022. When the time came, the company filed for bankruptcy on July 13, 2022.

Celsius had total liabilities of $6.6 billion and assets of $3.8 billion, resulting in a $1.2 billion hole in the company’s balance sheet due to the court ruling.

FTX collapse

FTX and its U.S. equivalent, FTX.US, filed for Chapter 11 bankruptcy on Nov. 11. The exchanges collapsed due to a lack of liquidity and money mismanagement, resulting in a large number of withdrawals from fearful investors.

Following the announcement of bankruptcy, FTX.US briefly restricted withdrawals on Nov. 11, despite earlier promises that FTX.US would be unaffected by FTX’s liquidity concerns. On the evening of Nov. 11, an alleged hack took more than $600 million from FTX wallets. The assault was revealed by FTX in its assistance channel on the instant-messaging network Telegram.

According to some Twitter users, hackers were also attempting to get access to FTX-linked bank accounts. Plaid, a company that connects consumer bank accounts with financial applications, responded to “concerning public reports” by denying FTX access to their products, claiming that they had no proof that their tools had been used unlawfully.

Bankman-Fried was arrested in the Bahamas on Dec. 12 at the request of the U.S. government, which wanted him extradited for eight criminal offenses, including wire fraud and conspiracy to defraud investors. Bankman-Fried was eventually deported to the United States and is awaiting trial after posting a $250 million bail.

BlockFi bankruptcy

The collapse of FTX earlier in the month generated fear and uncertainty across the market. BlockFi, another cryptocurrency exchange, filed for Chapter 11 bankruptcy on Nov. 28. With assets and liabilities ranging from $1 billion to $10 billion, the firm had over 100,000 creditors. In addition, they had a $275,000,000 debt to Sam Bankman-Fried’s American subsidiary, FTX US. The application shows that the largest client has a balance of $28 million.

Following the demise of Three Arrows Capital, multiple firms, including the crypto company that operates a trading exchange and an interest-bearing custodial service for cryptocurrencies, had serious liquidity issues.

Related: Women who made a contribution to the crypto industry in 2022

BlockFi agreed earlier this year to accept a credit package from FTX worth up to $400 million to help it weather a liquidity restriction caused by the exchange’s exposure to the TerraUSD stablecoin’s collapse. As a result of these concerns, BlockFi was reliant on the performance of the cryptocurrency exchange FTX, which may now jeopardize its financial stability.

While 2022 may have been a tough year for the crypto market, there may be a silver lining. Investor sentiment seems to be improving, and the crypto market has always recovered from previous bear markets and platform collapses. The events of 2022 could pave the way for new platforms to learn from the mistakes of their predecessors.

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Lower mortgage rates fueling existing home sales

To understand why we had such a beat in sales, you only need to go back to Nov. 9, when mortgage rates started to fall from 7.37% to 5.99%.



Existing home sales had a huge beat of estimates on Tuesday. This wasn’t shocking for people who follow how I track housing data. To understand why we had such a beat in sales, you only need to go back to Nov. 9, when mortgage rates started to fall from 7.37% to 5.99%.

During November, December and January, purchase application data trended positive, meaning we had many weeks of better-looking data. The weekly growth in purchase application data during those months stabilized housing sales to a historically low level.

For many years I have talked about how rare it is that existing home sales trend below 4 million. That is why the historic collapse in demand in 2022 was one for the record books. We understood why sales collapsed during COVID-19. However, that was primarily due to behavior changes, which meant sales were poised to return higher once behavior returned to normal.

In 2022, it was all about affordability as mortgage rates had a historical rise. Many people just didn’t want to sell their homes and move with a much higher total cost for housing, while first-time homebuyers had to deal with affordability issues.

Even though mortgage rates were falling in November and December, positive purchase application data takes 30-90 days to hit the sales data. So, as sales collapsed from 6.5 million to 4 million in the monthly sales data, it set a low bar for sales to grow. This is something I talked about yesterday on CNBC, to take this home sale in context to what happened before it. 

Because housing data and all economics are so violent lately, we created the weekly Housing Market Tracker, which is designed to look forward, not backward.

From NAR: Total existing-home sales – completed transactions that include single-family homes, townhomes, condominiums and co-ops – vaulted 14.5% from January to a seasonally adjusted annual rate of 4.58 million in February. Year-over-year, sales fell 22.6% (down from 5.92 million in February 2022).

As we can see in the chart above, the bounce is very noticeable, but this is different than the COVID-19 lows and massive rebound in sales. Mortgage rates spiked from 5.99% to 7.10% this year, and that produced one month of negative forward-looking purchase application data, which takes about 30-90 days to hit the sales data.

So this report is too old and slow, but if you follow the tracker, you’re not slow. This is the wild housing action I have talked about for some time and why the Housing Market Tracker becomes helpful in understanding this data.

The last two weeks have had positive purchase application data as mortgage rates fell from 7.10% down to 6.55%; tomorrow, we will see if we can make a third positive week. One thing to remember about purchase application data since Nov. 9, 2022 is that it’s had a lot more positive data than harmful data. 

However, the one-month decline in purchase application data did bring us back to levels last seen in 1995 recently. So, the bar is so low we can trip over.

One of the reasons I took off the savagely unhealthy housing market label was that the days on the market are now above 30 days. I am not endorsing, nor will I ever, a housing market that has days on the market at teenager levels. A teenager level means one of two bad things are happening:

1. We have a massive credit boom in housing which will blow up in time because demand is booming, similar to the run-up in the housing bubble years.

2. We simply don’t have enough products for homebuyers, creating forced bidding in a low-inventory environment. 

Guess which one we had post 2020? Look at the purchase application data above — we never had a credit boom. Look at the Inventory data below. Even with the collapse in home sales and the first real rebound, total active listings are still below 1 million.

From NAR: Total housing inventory registered at the end of February was 980,000 units, identical to January & up 15.3% from one year ago (850,000). Unsold inventory sits at a 2.6-month supply at the current sales pace, down 10.3% from January but up from 1.7 months in February ’22. #NAREHS

However, with that said, the one data line that I love, love, love, the days on the market, is over 30 days again, and no longer a teenager like last year, when the housing market was savagely unhealthy.

From NAR: First-time buyers were responsible for 27% of sales in January; Individual investors purchased 18% of homes; All-cash sales accounted for 28% of transactions; Distressed sales represented 2% of sales; Properties typically remained on the market for 34 days.

Today’s existing home sales report was good: we saw a bounce in sales, as to be expected, and the days on the market are still over 30 days. When the Federal Reserve talks about a housing reset, they’re saying they did not like the bidding wars they saw last year, so the fact that price growth looks nothing like it was a year ago is a good thing.

Also, the days on market are on a level they might feel more comfortable in. And, in this report, we saw no signs of forced selling. I’ve always believed we would never see the forced selling we saw from 2005-2008, which was the worst part of the housing bubble crash years. The Federal Reserve also believes this to be the case because of the better credit standards we have in place since 2010. 

Case in point, the MBA‘s recent forbearance data shows that instead of forbearance skyrocketing higher, it’s collapsed. Remember, if you see a forbearance crash bro, hug them, they need it.

Today’s existing home sales report is backward looking as purchase application data did take a hit this year when mortgage rates spiked up to 7.10%. We all can agree now that even with a massive collapse in sales, the inventory data didn’t explode higher like many have predicted for over a decade now.

I have stressed that to understand the housing market, you need to understand how credit channels work post-2010. The 2005 bankruptcy reform laws and 2010 QM laws changed the landscape for housing economics in a way that even today I don’t believe people understand.

However, the housing market took its biggest shot ever in terms of affordability in 2022 and so far in 2023, and the American homeowner didn’t panic once. Even though this data is old, it shows the solid footing homeowners in America have, and how badly wrong the extremely bearish people in this country were about the state of the financial condition of the American homeowner.

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SVB contagion: Australia purportedly asks banks to report on crypto

Australia’s prudential regulator has purportedly told banks to improve reporting on crypto assets and provide daily updates.



Australia’s prudential regulator has purportedly told banks to improve reporting on crypto assets and provide daily updates.

Australia’s prudential regulator has purportedly asked local banks to report on cryptocurrency transactions amid the ongoing contagion of Silicon Valley Bank’s (SVB) collapse.

The Australian Prudential Regulation Authority (APRA) has started requesting banks to declare their exposures to startups and crypto-related companies, the Australian Financial Review reported on March 21.

The regulator has ordered banks to improve their reporting on crypto assets and provide daily updates to the APRA, the Financial Review notes, citing three people familiar with the matter. The agency is aiming to obtain more information and insight into banking exposures into crypto as well as associated risks, the sources said.

The new measures are apparently part of the APRA’s increased supervision of the banking sector in the aftermath of recent massive collapses in the global banking system. On March 19, UBS Group agreed to buy its ailing competitor Credit Suisse for $3.2 billion after the latter collapsed over the weekend. The takeover became one of the latest failures in the banking industry following the collapses of SVB and Silvergate.

Barrenjoey analyst Jonathan Mott reportedly told clients in a note that the situation “remains stable” for Australian banks but warned confidence could be quickly disrupted, putting pressure on bank margins.

Related: Silvergate, SBV collapse ‘definitely good’ for Bitcoin, Trezor exec says

“Our channel checks indicate deposits are not being withdrawn from smaller institutions in any size, and capital and liquidity buffers are strong,” Mott said, adding:

“But this is a crisis of confidence and credit spreads and cost of capital will continue to rise. At a minimum, this will add to the margin pressure the banks are facing, while credit quality will continue to deteriorate.”

The news comes soon after the Australian Banking Association launched a cost of living inquiry to study the impact of the COVID-19 pandemic and geopolitical tensions on Australians. The inquiry followed an analysis of the rising inflation suggesting that more than 186 banks in the United States are at risk of a similar shutdown if depositors decide to withdraw all funds.

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Delta Move Is Bad News For Southwest, United Airlines Passengers

Passengers won’t be happy about this, but there’s nothing they can do about it.



Passengers won't be happy about this, but there's nothing they can do about it.

Airfare prices move up and down based on two major things -- passenger demand and the cost of actually flying the plane. In recent months, with covid rules and mask mandates a thing of the past, demand has been very heavy.

Domestic air travel traffic for 2022 rose 10.9% compared to the prior year. The nation's air traffic in 2022 was at 79.6% of the full-year 2019 level. December 2022 domestic traffic was up 2.6% over the year-earlier period and was at 79.9% of December 2019 traffic, according to The International Air Transport Association (IATA).

“The industry left 2022 in far stronger shape than it entered, as most governments lifted COVID-19 travel restrictions during the year and people took advantage of the restoration of their freedom to travel. This momentum is expected to continue in the New Year,” said IATA Director General Willie Walsh.

And, while that's not a full recovery to 2019 levels, overall capacity has also not recovered. Total airline seats available actually sits "around 18% below the 2019 level," according to a report from industry analyst OAG.

So, basically, the drop in passengers equals the drop in capacity meaning that planes are flying full. That's one half of the equation that keeps airfare prices high and the second one looks bad for anyone planning to fly in the coming years.

Image source: Getty Images.

Airlines Face One Key Rising Cost

While airlines face some variable costs like fuel, they also must account for fixed costs when setting airfares. Personnel are a major piece of that and the pandemic has accelerated a pilot shortage. That has given the unions that represent pilots the upper hand when it comes to making deals with the airlines.

The first domino in that process fell when Delta Airlines (DAL) - Get Free Report pilots agreed to a contract in early March that gave them an immediate 18% increase with a total of a 34% raise over the four-year term of the deal.

"The Delta contract is now the industry standard, and we expect United to also offer their pilots a similar contract," investment analyst Helane Becker of Cowen wrote in a March 10 commentary, Travel Weekly reported.

US airfare prices have been climbing. They were 8.3% above pre-pandemic levels in February, according to Consumer Price Index, but they're actually below historical highs.

Southwest and United Airlines Pilots Are Next

Airlines have very little negotiating power when it comes to pilots. You can't fly a plane without pilots and the overall shortage of qualified people to fill those roles means that, within reason, United (UAL) - Get Free Report and Southwest Airlines  (LUV) - Get Free Report, both of which are negotiating new deals with their pilot unions, more or less have to equal (or improve on) the Delta deal.

The actual specifics don't matter much to consumers, but the takeaway is that the cost of hiring pilots is about to go up in a very meaningful way at both United and Southwest. That will create a situation where all major U.S. airlines have a higher cost basis going forward.

Lower fuel prices could offset that somewhat, but raises are not going to be unique to pilots. Southwest also has to make a deal with its flight attendants and, although they don't have the same leverage as the pilots, they have taken a hard line.   

The union, which represents Southwest’s 18,000 flight attendants, has been working without a contract for four years. It shared a statement on its Facebook page detailing its position Feb. 20.

"TWU Local 556 believes strongly in making this airline successful and is working to ensure this company we love isn’t run into the ground by leadership more concerned about shareholders than about workers and customers. Management’s methodology of choosing profits at the expense of the operation and its workforce has to change, because the flying public is also tired of the empty apologies that flight attendants have endured for years."

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