From FTX to the Merge, 2022's defining moments

Quick Take

  • The crypto industry had a whirlwind of a year, with a massive boom turning into a devastating collapse.
  • Few businesses were unaffected by the crash and its fallout — and many were forced into bankruptcy.

2022 was defining for crypto, albeit not in a good way. Greed and exuberance took hold only to unravel in spectacular fashion.

The year started with attention on the timing of The Merge, which by now has become almost a footnote, overshadowed by scandal and collapse. Luna kicked off a wave of contagion among previously well-respected crypto firms. Few escaped getting hit by at least one lending company or exchange going under, culminating with the stunning implosion of FTX, once the third largest exchange by volume.

During the year, a common phrase among crypto circles was: “How much worse can it really get?” Somehow that question was answered each and every time with a new low, typically involving bankruptcy proceedings.

It wasn't all pain. Ukraine successfully raised nearly $100 million using cryptocurrency donations, showing how the technology can be effective. Bored Ape Yacht Club owners saw an airdrop worth hundreds of thousands of dollars each — as long as they didn’t lose their tokens in the many exploits targeting Bored Ape owners. Finally, the Ethereum blockchain had its biggest moment yet as it successfully implement The Merge.

Here’s a look at the 10 biggest stories from the last year in crypto.

The collapse of FTX

What started with an article by CoinDesk shedding light into Alameda Research’s balance sheet soon turned into a Twitter spat with former FTX CEO Sam Bankman-Fried blaming a competitor — read Binance — of spreading false rumors. At the time, Binance CEO Changpeng Zhao was dumping FTX’s native token FTT and showing concern about the health of the exchange. In response, Bankman-Fried tried to reassure customers that FTX was “fine.”

Customers weren’t convinced. Over the first weekend of November, the exchange’s users withdrew around $6 billion of funds, pulling them to other exchanges or their own wallets for safekeeping. During the run, there was still a lot of speculation and uncertainty about the state of the exchange, with many people withdrawing just to be safe. But it was only when withdrawals were halted that the situation seemed truly dire.

On Nov. 8, FTX admitted it was game over and said it was looking to get acquired by Binance — leading to a devastating crash in the price of FTT.

A few days later it filed for bankruptcy.

In the wake of FTX

In the aftermath, we found out that the exchange was an absolute disaster of historic proportions. It appears that funds were comingled between the exchange and Alameda, risk controls were lacking and client funds were effectively used to pay off a massive margin position that gotten out of hand.

New FTX CEO John J. Ray III summed it up nicely: “Never in my career have I seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here.”

Since then, Bankman-Fried has been arrested and transferred to the U.S., where he is facing up to 115 years in prison. FTX’s creditors are now looking ahead to the next decade of proceedings, while those who lost funds to a similar exchange collapse of Mt. Gox in 2014 are still waiting.

Luna’s epic demise

While FTX was arguably the most destructive event — in terms of real, not paper, losses — Luna’s collapse was the event that triggered all of the fallout.

Luna was a novel idea of creating an algorithmic stablecoin, a token designed to stay pegged to the U.S. dollar without being directly collateralized. It involved a freefloating token called luna and a stablecoin called UST. The problem was it had one design flaw: A fundamental construction that meant, in the event of an effective bank run on the token, the tokens would create a death spiral, sending their values plummeting.

And that is exactly what happened. Due to the core mechanism in place, as UST lost its peg to the U.S. dollar and the situation worsened, the network minted more and more luna to try to save the value of UST. This caused the value of luna to drop, resulting in even more minting on an exponential scale. During luna’s collapse, its supply went from 340 million tokens to 6.5 trillion. Its price went the other way, completely flatlining.

The total damage was the loss of luna’s $22 billion market cap, wiping out huge paper gains for many retail and institutional investors. While luna was restarted under a new name, it didn’t fix the disaster and the wider crypto industry is still picking up the pieces.

The fall of Three Arrows Capital

Until the collapse of luna, Three Arrows Capital were widely regarded as one of the best hedge funds in the crypto space. Its reputation was of such caliber that companies like Genesis, and Voyager Digital lent the firm billions of dollars.

Yet the fund got hit over and over again until it was wiped out. 3AC co-founder Kyle Davies said that the fund only took a $600 million hit from luna — from a $200 million initial investment — which was damaging but not a death blow. Then it faced a liquidity crunch, lenders recalling loans, the decline in prices for many major cryptocurrencies and even drops in the price of the Grayscale Bitcoin Trust and stETH — a liquid staking derivative of ether. All of these added further pain for the fund.

Davies claimed the final blow was when its remaining position on FTX was liquidated. He made further claims that Alameda Research was aware of its liquidation level. Since then the firm has filed for liquidation, with $3.5 billion of claims from creditors.

Ukraine’s crypto donations and almost-airdrop


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Taking a break from bankruptcy filings for a moment, earlier this year we saw a country take advantage of the global reach that cryptocurrency offers to raise funding. Ukraine, in the early days of the Russian invasion, asked for donations in bitcoin, ether and the stablecoin tether. In total, the country received nearly $100 million in crypto donations from individuals around the world.

The donations were spurred on by an interesting ploy. During the donation period, Ukraine said that it intended to airdrop tokens to those who donated. This led to a rapid increase in donations by those speculating on the potential value of the airdropped tokens, as opposed to humanitarian reasons. Yet it abruptly cancelled the planned airdrop, announcing plans to sell NFTs instead.

The NFT sale was a flop. They only ended up bringing in around $1.2 million, a small fraction of their wider crypto donations.

Yuga Labs had a spectacular year

In March, Bored Ape Yacht Club owners were treated to an airdrop of ApeCoins for each of their NFTs — whether they were bored apes, mutant apes or had additional NFTs that were part of the kennel club collection. The airdrop for one Bored Ape was initially worth around $140,000.

Some traders were crafty about the airdrop. One person borrowed a set of five Bored Apes from a vault designed for fractionizing NFTs, whereby a holder creates derivative fungible tokens that each purport to represent a corresponding amount of the NFT. For example, if a holder owns 2% of the tokens, he theoretically owns 2% of the NFT.

In one swift transaction, they took the apes out of the pool, claimed the airdrop and returned them — netting a cheeky $1.1 million in ApeCoin. Not bad for a day’s work.

A Bored Ape from the BAYC collection. Image: Yuga Labs.

Around this time, there were rumors of something bigger. The Block broke the news that Yuga Labs was planning to sell metaverse land for an upcoming game. Sure enough, in May, Yuga Labs sold 55,000 plots of land for $317 million, setting a new record for an NFT mint. At the time, Yuga Labs even hinted it may start its own blockchain, but nothing has come of that so far.

Axie Infinity: The Ronin hack

While Axie Infinity was crypto’s biggest blockchain game, its underlying blockchain the Ronin network ended up being the ground for crypto’s biggest hack. The network lost $540 million of cryptocurrency after a hacker took control of five of its nine validators.

A few months later, The Block found out that the hack was caused by a senior engineer at Sky Mavis — the company behind Axie Infinity — being duped into applying for a fake job. After multiple interviews, the engineer was sent an offer in the form of a PDF document, which contained spyware. This gave them control over four of the validators but they need one more to take full control. They managed to get the fifth from an Axie DAO validator.

Following the hack, Sky Mavis increased the number of validators on the network to 17 validators. The hacker was later identified as the North Korean hacking group Lazarus.

Celsius stopped in its tracks

Back to bankruptcy. In the wake of luna’s crash, lending company Celsius Network turned out to have a large hole in its finances. It's still unclear as to exactly how this happened but the company appeared to have a myriad of high-risk lending strategies mixed with a willingness to throw customer funds into experimental DeFi platforms, such as Badger Finance.

In July, Celsius filed for Chapter 11 bankruptcy protection. Court filings showed that it had a $1.2 billion hole in its balance sheet. This even included $600 million of its own celsius tokens as assets, even though that was far greater than the token's market cap at the time, suggesting those tokens would not be able to be sold for anything close to that amount.

Genesis, Grayscale and a host of worries for DCG

Digital Currency Group (DCG) is a behemoth in the industry, owning Grayscale, Genesis and The Block's' rival CoinDesk while having investments across the crypto space. Yet it was not immune from the collapse of luna and the wider market downturn.

Genesis is the main cause of its concerns. The company lent $2.3 billion to Three Arrows Capital, leaving it with a shortfall of over $1 billion. DCG took on this liability to help protect the company. But Genesis took a further hit when FTX collapsed as it had $175 million left on the exchange. Now the company is in dire straits and on the brink of bankruptcy.

Grayscale is DCG’s main money maker, bringing in huge revenue from its annual 2% fee, with its flagship Bitcoin Trust (GBTC) looking after $10.6 billion of assets. But GBTC has seen its value drop far below the value of the underlying bitcoin, making it painful for investors to cash out. DCG tried to help by buying $388 million of shares with plans to go as high as $1 billion. The move was futile and the discount dropped as low as 50% — causing headaches for all GBTC holders, including DCG.

Ethereum underwent The Merge

While greed and corporate failure defined crypto in 2022, we still saw a host of advancements for the underlying technology. Several newly designed blockchains were launched alongside new layer two networks and improvements in zero-knowledge technology. But the biggest event was The Merge.

Ethereum’s long-awaited switcheroo from proof of work to proof of stake went off without a hitch. The network said goodbye to miners and welcomed a new array of validators to run the network instead. This had a big change on the network’s environmental impact, reducing it by more than 99% and making NFTs now climate friendly.

Ethereum’s tokenomics also saw a big change. Since The Merge, the network has had a much lower inflation rate, paying out fewer tokens to validators than it did to miners. At the same time, it continues to burn tokens when lots of people are using it. In effect, the network’s inflation rate is near to zero, and can sometimes be negative — where the supply actually decreases.

Disclaimer: The former CEO and majority shareholder of The Block has disclosed a series of loans from former FTX and Alameda founder Sam Bankman-Fried.

© 2023 The Block. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

About Author

Tim is the Editor-In-Chief of The Block. Prior to joining The Block, Tim was a news editor at Decrypt. He has earned a bachelor's degree in philosophy from the University of York and studied news journalism at Press Association Training. Follow him on X @Timccopeland.


To contact the editors of this story:
Walden Siew at
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Christiana Loureiro at
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