Last year, the cryptocurrency market was hit hard due to market volatility and bankruptcies. Cryptocurrency investors and users faced the worst bear markets in late 2022 due to the sudden collapse of FTX. Before FTX, there were a number of bankruptcies, including Terra and Celsius, among others. The holders of large wallets, the "whales", reduced their Bitcoin holdings during the market turmoil.
According to a report from the Bank for International Settlements (BIS), most cryptocurrency users faced losses on their Bitcoin holdings due to previous bankruptcies and cyberattacks on the cryptocurrency market. According to the report, more than $450 billion went missing during the market turmoil that followed Terra's May 2022 crash, and another $200 billion was lost in FTX bankruptcy in November 2022.
In May 2022, the algorithmic stablecoin TerraUSD (UST), which was supposed to maintain a one-to-one peg with the US dollar, suddenly crashed. In just a few days, the value of UST plummeted from $1 to near zero, sending shockwaves through the market. Previously, Do Kwon, co-founder of Terraform Labs, was accused of a Ponzi scheme that cost him billions of won. The Seoul government sued Kwon for violating the Capital Market Law and charged five other Terraform employees in the case.
Seoul investigators have been searching for Kwon for the past few months. Since July, the South Korean government has raided Kwon and some Terra employees, including Gopax, Coinone, Upbit, Bithumb, and Korbit. In September 2022, the court issued a warrant to arrest Kwon and the other five members involved.
Another big crash in cryptocurrency history happened on November 11 of last year. FTX, once the world's second-largest cryptocurrency exchange, valued at $32 billion (USD) at its peak, owed millions of frustrated customers money in late 2022 due to its liquidity concerns and solvency.
โThe median investor would have lost $431 by December 2022, which is almost half of the total $900 in funds invested since downloading the app. In particular, this share is even higher in several emerging market economies such as Brazil, India, Pakistan, Thailand and Turkey.
Previously, US lawmakers were urged to want new crypto guidelines to address upcoming crypto crashes. Crypto analysts believe that clear regulations on stablecoins and crypto assets would help develop the crypto market in the United States.
Rostin Behnam, Chairman of the Commodity Futures Trading Commission (CFTC), says that certain regulations are needed to prevent heavy losses in the crypto market and keep users safe. He said that clear regulation on non-securities crypto assets would be required.
โTo ensure the stability of the financial system, societies must decide on the appropriate policy response to address risks in cryptocurrencies before they become systemic. Preferably, they should act in a globally coordinated manner,โ the BIS report said.
