Crypto has always been a fast-paced industry. Anyone following the crypto news headlines in 2022 might have felt like seismic developments rocked the crypto world at a much faster pace compared to prior years, though.
Some of the most impactful crypto stories of 2022 include a major cryptocurrency switching to an energy-efficient proof of stake model, several high-profile crypto exchanges folding, and more regulatory scrutiny of crypto.
Here are the 5 biggest crypto stories of 2022.
FTX goes bankrupt in matter of days, leaving crypto world and creditors reeling
In a year with several big deal bankruptcies in the crypto industry, the rapid fall of the FTX empire was arguably the most captivating crypto storyline of 2022. The Bahamas-based crypto exchange seemingly did all it could to become a household name – which might make its quick downfall even more surprising. Sponsorship deals for sports arenas, Formula 1 racing teams, and celebrity endorsements were part of the all-out marketing blitz from FTX. Ironically, more people may remember FTX for its rapid implosion instead of its wide-ranging marketing playbook.
Original reporting from CoinDesk showed that FTX had close ties with sibling company Alameda Research, and then a series of unfortunate events followed. First, rival exchange Binance announced they would be offloading all FTT tokens (the native governance token issued to FTX customers for discounted fees and other perks).
People holding their crypto on FTX started to panic. A buyout offer from Binance was taken back almost as quickly as it was proposed, with Binance backing out of the deal to acquire FTX after taking a closer look at the latter’s books. Withdrawals were halted for FTX customers, a massive $600M hack took place, and CEO Samuel Bankman-Fried stepped down amid a whirlwind of shock, disappointment, and anger within the crypto community.
Ethereum merges to proof of stake consensus mechanism
On the brighter side of crypto news, ethereum’s successful merge to a proof of stake consensus mechanism was one of the more hopeful storylines of 2022. The merge from proof of work (think: lots of supercomputers crunching complex equations round the clock) to proof of stake (an exceedingly more eco-friendly solution) was in the planning and testing stages for years before culminating in one of the most significant upgrades to a major cryptocurrency. When’s the last time something this consequential happened in crypto? The answer may be, "Never!”
It’s a big deal when the world’s second-largest cryptocurrency by market capitalization undergoes a radical transformation to its underlying architecture. Ethereum software engineers managed the merge without major outages to the network. The future could possibly hold more technological advancements for ethereum, because a post-merge network has the capability to be more scalable and secure. Plus, the new proof of stake process calls for the “burning” of ETH tokens that has already turned the popular cryptocurrency into a deflationary asset.
The Biden Administration gets serious about crypto
A little structure can be a nice thing. The Biden Administration published an executive order on crypto in March 2022 that provides a structural framework for various government agencies to align regulatory efforts. Prior to the executive order, a piecemeal approach had various federal agencies within the United States government vying for the responsibility to oversee different crypto activities. Crypto investors and entrepreneurs alike weren’t always certain which agency might come knocking when it came to crypto activities such as registering an exchange or offering crypto-based products to customers.
With the guidance outlined in the 2022 executive order on crypto, government agencies were given a clearer roadmap when it came to the United States’ big-picture goals for crypto. In a nutshell, the Biden Administration wants the United States to continue driving innovation in crypto while also putting an emphasis on consumer safety. Given the other top crypto stories in 2022, protecting consumers’ crypto assets has become more important than ever.
Terra’s UST & LUNA fall to Earth
The Terra downfall in May of 2022 turned out to be one of the most consequential crypto developments of the year. In case this saga flew under the radar, a stablecoin offered by Terra that was backed by a companion token tanked so fast that it set off a contagion event that ended up sinking a crypto venture capital firm and spelling the end Terra’s high-flying valuation.
First, a little background on the technical fundamentals of the project that preceded UST and Luna’s spectacular fall to earth: terraUSD (UST) was an algorithmic stablecoin that wasn’t backed by any cash reserves. Instead, UST employed an algorithm to execute smart contracts that protect against market volatility in real-time. Terra had a “two-coin” system that tied its UST stablecoin to Luna, a governance token, and this in turn had its value pegged to the value of the U.S. dollar.
But the whole system unraveled in quick fashion once the Luna token lost its peg to the U.S. dollar. The Terra network had an estimated value of nearly $80 billion heading into 2022. After the collapse of the UST stablecoin and the Luna debacle, almost all that value disappeared in rapid fashion.
European Union moves closer to landmark crypto bill, starts building regulatory framework
Crypto’s Voyage dans la Lune? The European Union (EU) and member states like France are trying to position themselves as a crypto-friendly destination for global crypto exchanges and startup blockchain projects. Part of that pitch effort is providing sensible regulations as a backstop to protect consumers.
The Markets in Crypto Assets regulation (MiCA) would allow crypto services providers to market their products in the EU in exchange for national registration and commitment to certain regulations. Whether or not this comprehensive set of rules can help entice crypto operators to set up shop near Portugal’s beaches or along the avenues of Paris remains to be seen. Review and passage of the MiCA framework is planned for 2023.
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