Source | CoinsBench
Author | MEXC Research
2022 has been an unexpected year for the crypto industry. From the peak of nearly 3 trillion yuan at the beginning of the year, it has been all the way down. In the complex context of global monetary tightening and the epidemic, LUNA collapsed and well-known institutions such as FTX collapsed. Many far-reaching black swan events caused the cryptocurrency market value to plummet. Bitcoin plummeted below $15,000 and the ecosystem was severely damaged.
Beyond the haze, there is also light in 2022. This year, Ethereum completed the merger and successfully switched from PoW to PoS, laying the foundation for subsequent expansion; The ecosystem is unified across the industry: BAYC acquired CryptoPunks and Meebits; Stepn set off the M2E wave and drove the development of GameFi; Industry regulation triggered by bankruptcy provides a new foothold for industry compliance development and consumer protection.
Approaching the New Year, we will review the top ten events in the crypto industry in 2022 and once again feel the magic and reality of the development of the crypto market.
Yuga Labs acquires CryptoPunks
The most well-known NFT in 2022 is BAYC. Since January, BAYC's development team, Yuga Labs, has been marketing frequently. OpenSea CFO Brian Roberts, stars Neymar, Justin Bieber, Musk, Jay Chou, Goldman Sachs Group executives and other stars have announced that they hold BAYC or change to BAYC avatars. In a series of operations, BAYC's floor price exceeded 100 ETH for the first time.
On March 12, Yuga Labs shocked the entire crypto industry by announcing the acquisition of CryptoPunks and Meebits.
CryptoPunks is a landmark project in the NFT industry, issued in 2017, and has always been considered Bitcoin in the NFT industry.
In 2021, BAYC rose to prominence and became an upstart in the industry. Featuring brand, ecology and expansion, it is regarded by the market as Ethereum in the NFT industry. This acquisition was ridiculed by the community "Ethereum" in the NFT industry, which acquired "Bitcoin" and gave away a "Litecoin".
Second, the Ronin multi-chain bridge was stolen for $550 million
In March this year, the Ronin Multichain Bridge was hacked, losing about $620 million, once becoming one of the largest hacks in the history of the crypto industry.
Ronin is the Ethereum sidechain of the popular NFT game Axie Infinity. For many Axie Infinity players, they usually don't operate in just one blockchain ecosystem, so Axie Infinity developed the multi-chain bridge Ronin Bridge. This allows players to deposit Ethereum or USDC into Ronin, use it to buy NFTs or in-game currency, or sell their in-game assets and withdraw funds.
Earlier this year, the hacking group impersonated a fake company and sent job advertisements to Axie Infinity's development team through LinkedIn, inviting development engineers to work at the company. After the hacker controls the 4 Ronin validator nodes through the spyware implanted in the fake offer, he uses the RPC node backdoor to obtain the signature of Axie DAO, thereby controlling the signatures of the 5 nodes and finally achieving asset theft.
Outrageously, the hack took place on March 23, but was not discovered until March 29, when users were unable to withdraw 5,000 ETH. During the week, no one managed the bridge or provided liquidity, and no one realized that the funds had been withdrawn.
2022 is a year of frequent hacker attacks. According to blockchain security firm PeckShield, the main losses caused by hacking and protocol vulnerabilities in 2022 have exceeded $3 billion, from $1.55 billion in 2021 to just $250 million in 2020. Hope there are no more hacks in 2023!
Third, Otherside public sale, gas set a new record
Bak! Yes, this event has something to do with it!
On March 23, BAYC's parent company, Yuga Labs, received $450 million in funding from a16z, the largest NFT funding to date. The funds will be used for the construction of the new project Otherside, leaving expectations for the market.
On April 29, Yuga Labs feared that the Otherside public sale would spark a gas war. Not only did the Dutch auction be cancelled, 305ApeCoin was sold at a fixed price, and sellers were allowed to pre-approve 12 hours in advance. At the beginning of the sale, a mandatory limit of 2 NFTs per wallet is enforced.
Ultimately, these measures still can't change network congestion and gas fee wars. On May 1, Otherside went public. In a short period of time, ETH Gas fees rose rapidly, and the highest exceeded 8,000Gwei. Many buyers trade with gas fees in excess of 2ETH. Gas fees are maintained above 5,000Gwei and usually require only small double digits.
The other deed NFTs were all minted and ended up using 62,423 ETH (worth about $170 million at the time), about 79% of Ethereum's total gas consumption in the last 3 hours. This results in a new record of ETH destruction in the last 24 hours.
Fourth, Stepn went public, and the chain became popular
The hottest chain game in the GameFi market in 2022 is STEPN, which is built on the Solana chain and claims to be the world's first Move To Earn game. STEPN's path to growth is bright. Just over a month after the project was established, it won the fourth place in the Solana Hackathon chain game section and won the official grant award. Soon after, it received a $5 million seed round led by Sequoia Capital.
In early April, STEPN officially announced that its market capitalization exceeded $1 billion, becoming a unicorn company. At its peak, STEPN had 1 million users and 4.72 million registered users, earning up to $122.5 million in profits in a single quarter.
According to Dune Analytics, StepN's monthly active users surged in May and June, surpassing 700,000 in May and approaching 500,000 in June. In July 2022, due to the influence of the policy, STEPN announced its withdrawal from Chinese mainland users, which became a turning point in its development. SINCE THEN, UNDER THE INFLUENCE OF THE BEAR MARKET AND ITS TOKENOMICS, STEPN HAS LOST ITS GLORY. The data shows that STEPN's monthly active users have fallen below 25,000 since December last year, and it fell by 96.4% in May this year.
According to CoinMarketCap, GMT also underperformed. The coin is down 91% from its high. Although the project has largely failed, STEPN, as one of the most popular typical Web3 applications this year, has pushed the public base of X to Earn to a new level. Many traditional investment institutions have also entered the market, which strongly promotes the future development of GameFi.
5. HKUST collapsed and Terra went bankrupt
Until May 2022, Terra remained one of the most valuable cryptocurrencies in the world. The price of the governance token LUNA has risen nearly a thousand times in two years, with a market cap of more than $41 billion. The project plummeted in less than a week, and LUNA fell from nearly 100U to 0.000001U, resulting in countless people losing their lives.
Terra created a fiat-pegged stablecoin USTC, which relies on algorithmic mechanisms to align with the U.S. dollar. The system allows users to mint new USTC tokens by burning an equal amount of LUNA tokens or exchanging USTC for new LUNA tokens.
The Anchor Protocol, a lending platform on Terra, provides 20% of the revenue for USTC, which makes USTC very attractive in the current market context. As market participants continue to pour into USTC, LUNA destruction volume increases and prices rise.
The story takes a dramatic turn. Three weeks before the crash, Terra Development Company irresponsibly sold more than $450 million in USTC on the market.
On May 7, 2022, Terra's USTC pool collapsed due to a massive sell-off by whales.
On May 9, 2022, the University of Science and Technology of China lost its peg again, triggering a run on users across the board. USTC holders rush to redeem their tokens with LUNA, increasing the supply of LUNA and devaluing the token, causing more USTC holders to redeem. Terra's algorithm drove multiple additional issuances of LUNA, and LUNA and USTC entered a death spiral, eventually leading to a crash.
The decline of LUNA has even led to the decline of the entire crypto market. The cryptocurrency market fell by more than $600 billion in 6 days. Three Arrows Capital, Celsius and many other institutions have experienced various chain reactions and have collapsed one after another. THE CRYPTO CRISIS TRIGGERED BY THE COLLAPSE OF LUNA WAS LATER LIKENED TO THE FINANCIAL CRISIS TRIGGERED BY THE COLLAPSE OF LEIMAN IN 2008.
Blue-chip NFTs are in a liquidity crisis
In the NFT space, collectors are used to referring to head items as "blue chip" projects. The protagonist of the last event, BAYC, is a representative project of blue-chip NFTs. Since 2021, a group of well-known people such as hip-hop artists, NBA stars, football players, and listed companies have purchased Bored Ape NFTs. On May 1, the floor price of the bored ape reached a sky-high price of 153.7 ETH, and then began to pullback.
On August 24, the floor price of BYAC NFT fell to 66.9ETH, down more than 56% from the peak.
The NFT market has since lost its trading popularity, and the weekly trading volume has repeatedly reached new lows. The floor price of Bored Ape NFTs has been falling, while exposing existing financial risks. The sharp drop in prices has led to a liquidity crisis in all major NFP lending protocols. The liquidation of BAYC triggered a ripple reaction of other blue-chip NFTs, with a huge impact on the entire NFT market.
U.S. Treasury sanctions against Tornado Cash
On August 8, the U.S. Treasury Department's Office of Foreign Assets Control announced the addition of the Tornado cash protocol to the sanctions list.
Tornado cash is a privacy-preserving protocol that helps users obfuscate their on-chain transaction history. Cybercriminals, including North Korean-backed hackers, use Tornado cash as a money laundering tool, the agency said.
As soon as the news came out, institutions such as Circle and Infura responded to the sanctions and immediately blacklisted Ethereum addresses that interacted with Tornado Cash, and then blacklisted some DeFi protocols to block wallets from their front ends.
In August 2022, Alexey Pertsev, the core developer of Tornado Cash, was arrested by Dutch authorities on suspicion of assisting money laundering. His appeal was rejected in September and he remains in prison. It is reported that he will serve his sentence in prison until February next year.
Tornado cash's ban is unprecedented, marking the first time a government agency has approved open-source code rather than a specific entity, and reflects concerns about Ethereum's ability to maintain anti-investigations.
Notably, the cryptocurrency community has taken various steps to change this. Most notable is the lawsuit filed against OFAC by crypto organizations such as Coinbase and Coin center, saying that OFAC has no authority to restrict sanctions on software programs because software code is an expression of speech that may violate citizens' right to free speech. Personal privacy under the First Amendment to the U.S. Constitution.
8. Merge Ethereum
2022 has been a tough year for the crypto industry. Despite the frequent negative events, Ethereum gives hope to the crypto space.
On September 15, the Ethereum merger was successful, marking the official transformation of the consensus mechanism of the Ethereum mainnet from proof-of-work (PoW) to proof-of-stake (PoS).
At the end of January, the Ethereum Foundation announced that it would stop using "Ethereum 1.0" (ETH1) and "Ethereum 2.0" (ETH2) and replace them with "Execution Layer" and "Consensus Layer". The merger of ETH is also the largest technical upgrade of Ethereum after EIP-1559.
The merger of Ethereum not only affected the price of the ETH token itself, but also drove the price of the Ethereum ecological project token and accelerated the issuance of Layer 2 project tokens. ETC has become an alternative to PoW miners, some of whom want to hard-fork Ethereum.
According to the latest data from Ultrasound, the Ethereum network has burned a total of 2,773,236.99 ETH so far. Since the successful upgrade of the Ethereum blockchain on September 15, the token supply of Ethereum has only increased by a net 1,305.24 ETH. It is worth noting that on October 27, ETH entered monthly deflation for the first time, and the 30-day average new increment was already negative.
9. The Fed has raised interest rates several times
Despite the frequent black swan events in 2022, there are direct reasons for the bankruptcy and collapse of Terra, FTX, and Three Arrows Capital. But the root cause is inextricably linked to cash flow constraints caused by global monetary tightening.
The Fed has continued monetary tightening this year and has increased the frequency of interest rate hikes, especially as the crypto market is shocked.
Current inflation in the United States is at its highest level since 1980, benchmark interest rates are at their highest eight-month level since 2008, and rates have been raised to 3.75-4.00% since the Fed announced a rate hike of 75 basis points on November 3, but rate hikes are still expected to occur in the future.
Former U.S. Treasury Secretary Lawrence Summers said the Fed may need to raise interest rates to 6 percent or higher as the U.S. economy remains strong.
In the second half of 2022, the crypto market was mainly affected by CPI data. Historically, the volume of trading volume and Bitcoin price yields across the cryptocurrency market have fluctuated significantly in the days leading up to the release of CPI data.
10. Bankruptcy of FTX (FTT).
On November 4, CoinDesk tweeted Alameda's financial filings. The financial document shows that Alameda has significant risks on the balance sheet owned by FTX founder SBF, and the amount of related transactions with the FTX exchange controlled by SBF is huge. Alameda has $14.6 billion in assets, mostly FTT, the FTX platform token. Once Alameda goes bankrupt, FTX's capital operations will be affected.
On November 6, Binance founder CZ tweeted that Binance received about $2.1 billion in cash equivalent in BUSD and FTT as part of Binance's exit from FTX last year. Due to recent revelations, Binance decided to liquidate the FTT on its books.
On November 7, Binance began selling FTT, triggering a chain reaction in the market. More than $1 billion was transferred out of FTX and Alameda addresses.
On November 8, SBF tweeted to reassure the market and users, claiming to have the ability to cover all user assets, but users did not buy it. Many customers are still transferring funds, and stablecoins on FTX are quickly running out. FTX quickly paused withdrawals in the face of a sudden wave of withdrawals. The panic that continued to accumulate fermentation finally broke out, and FTT and SBF-related sector tokens fell sharply.
On November 9, SBF and CZ announced that Binance will fully acquire FTX. FTT ushered in a brief correction, while Binance's acquisition of FTX failed due to antitrust violations, which also confirms FTX's liquidity crunch. FTT went into liquidation mode with the lowest price falling to %$2.5.
In the end, FTX's bankruptcy had billions of dollars in equity loopholes that affected millions of users. SBF and FTX went from $26 billion to zero in just a few days. SBF has been arrested by Bahamian police and he may be extradited to the United States.
Most of the family members witnessed these events, and some even experienced them firsthand. In 2022, some people rejoice and some people worry. After summarizing the story of 2022, what new stories will appear in 2023? Do you think the crypto market will rebound in 2023, usher in a big reversal or continue to shock downwards?
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