The Five Scariest Crypto Stories of 2022

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After more than 13 years of ups and downs, this year stands out as the most turbulent bear market in crypto history. Due to a combination of factors – which include regulatory clearances across the globe and improved credibility among projects that survived the bear market – the crypto world has marked many milestones this year.

However, there are certain events in 2022 that could give the toughest diamond hands goosebumps. Additionally, it was impressive to see crypto projects, in many cases helping each other, bounce back through an era of uncertainty.

Recognizing the spookiest happenings this Halloween, we list the scariest events that have rocked the crypto ecosystem, leaving a significant impact on investors, businesses, entrepreneurs, miners, and developers.

The main driver of the following list is largely attributed to the highly volatile period and geopolitical uncertainties, which saw the price drop across all sectors.

The Extended Crypto Crash: Bear Fear

The year 2022 inherited a turbulent crypto market, which began to slowly collapse in November 2021. As a result, immense fear and uncertainty gripped the crypto ecosystem from the start of the year.

The bear market engulfed over $1 trillion from the crypto market, reducing the overall market capitalization from over $2.5 trillion to under $1 trillion in a matter of months.

The 2022 crypto crash spooked investors as it drained profits from all sub-ecosystems, including Bitcoin (BTC), cryptocurrencies, non-fungible tokens (NFTs), and decentralized finance (DeFi), among others.

The loss was felt both ways. While depreciating prices meant investors lost part of their savings, businesses struggled to stay open amid heavy selling and a lack of investment.

The frightening instability of algorithmic stablecoins

The collapse of the Terra ecosystem is widely considered to be the biggest financial catastrophe ever seen in crypto by a single entity, and with good reason. The two in-house offers from Terra Labs destabilized and almost instantly lost their market value.

Early in the crash, Terra co-founder Do Kwon was found publicly discussing ways to help investors recoup their losses. Binance CEO Changpeng Zhao suggested burning LUNC tokens to reduce the token’s total supply and improve its price performance.

Shortly after, as regulatory scrutiny began to pile up against Terra’s operations, Kwon decided to go undercover, not knowing his exact whereabouts.

Numerous entities — including disgruntled investors, South Korean authorities and a Singapore lawsuit — are still pursuing Kwon, despite his comments to the contrary.

However, Kwon maintains that he is not “on the run” and plans to reveal the truth in the near future. The entire incident highlighted the risks associated with algorithmic stablecoin peg mechanisms.

Similarly, the stablecoin Acala USD (aUSD) lost its peg in August 2022 after a protocol exploit caused a 3.022 billion aUSD misminting. A subsequent decision to burn the contaminated tokens was made in order to regain their monetary value. Given the many other examples of stablecoin crashes, a bill in the US House of Representatives called for criminalizing the creation or issuance of “endogenously backed stablecoins”.

Mass layoffs and job cuts

The burden of losses has also been shared by former employees of some crypto companies. Major players including Robinhood, Bitpanda and OpenSea have announced mass layoffs, for reasons that date back to surviving the bear market.

On the other hand, crypto exchanges such as FTX and Binance have shown resilience in the face of price volatility and continued their hiring spree to support the ongoing expansion drive.

Crypto organizations that have chosen to lay off employees have done so to reduce operational costs and reduce loss-making components.

More recently, it was found that over 700 tech startups were laid off this year, affecting at least 93,519 employees globally. However, the tech community – from crypto and non-crypto sectors – has been found migrating to Web3.

Crypto hacks: humans are the real monsters

One of the most visible problems engulfing crypto, such as hacks and scams, just got worse in 2022. Hackers drained millions of dollars from crypto by exploiting vulnerabilities in poorly verified crypto projects .

A strategy widely adopted by hacked projects this year was to offer the hacker a pink slip to return some of the loot. In the case of Transit Swap, a decentralized exchange aggregator, the hacker agreed to return approximately 70% (about $16.2 million) of the $23 million stolen fund.

While some hackers have opted to return some of the funds in exchange for immunity from prosecution, other projects such as Kyber Network and Rari Fuze have failed to sue their respective hackers to return the stolen funds.

This year has also seen an increase in the number of phishing attempts, where hackers have managed to gain access to the social media accounts of prominent figures, such as the South Korean government’s YouTube channel, the Prime Minister’s Twitter account Indian Narendra Modi and the PwC Venezuela Twitter account for fake giveaways to millions of followers.

Governments around the world have consistently issued warnings against phishing attempts involving scam apps and websites impersonating major crypto exchanges like Binance.

Overdue Resurrection: NFT, Web3, and the Metaverse

Discussions around non-fungible tokens (NFTs), Web3, and the metaverse have taken the crypto ecosystem by storm, promising virtual use cases that extend to the real world. Celebrities, actors, musicians and artists have catalyzed adoption by using emerging technologies as tools to reconnect with fans or simply inflate their own wealth.

The NFT hype was officially declared dead in July 2022 when daily sales hit yearly lows as investors who recently suffered losses refrained from stepping on the seemingly sinking ship.

Despite the dive statistics, the NFT ecosystem has received support from some of the biggest celebrities, including musicians Snoop Dogg and Eminem, tennis legend Maria Sharapova, and professional fighters Connor McGregor and Floyd Mayweather.

Diminishing interest in NFTs has resulted in a lack of investment in new projects creating use cases around Web3 and the Metaverse. Meta, arguably the biggest competitor in the Metaverse, plans to inject $10 billion annually into its project. However, an unclear roadmap and uncertain revenue streams prevent the ecosystem from reaching mainstream acceptance.

Aside from the fear, the biggest lesson that the scariest happenings in the crypto storefront is the need to do independent research before making any investments. Past mistakes – like investing in an unverified project, trusting unknown sources, and sharing private information on the web – will come back to haunt you.

This Halloween, Cointelegraph wishes you pumpkin spice and all things sweet. Visit Cointelegraph to stay up to date with the most important developments in crypto.


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