
FTX founder Sam Bankman-Fried leaves Manhattan Federal Courtroom after his first court docket look in New York. Federal prosecutors have charged him with legal fraud.
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Michael M. Santiago/Getty Photos

FTX founder Sam Bankman-Fried leaves Manhattan Federal Courtroom after his first court docket look in New York. Federal prosecutors have charged him with legal fraud.
Michael M. Santiago/Getty Photos
There’s an expression crypto lovers use, with fingers crossed, within the hopes a selected digital forex’s worth will blast off: “To the moon!”
A lot of crypto did graze the stratosphere in the beginning of 2022, when enthusiasm was astronomically excessive, however a number of months later all of it got here crashing again right down to Earth.
Bitcoin’s worth is roughly a fourth of what it was a yr in the past, and the business is simply beginning to grapple with the fallout from the catastrophic implosion of the cryptocurrency alternate FTX.
Sooner or later, 2022 could also be thought to be a turning level for the world of digital currencies, once they misplaced their luster and had been forged out as a fringe product most individuals method with skepticism and warning. Or it might merely be remembered as a stretch of excruciating rising pains for an business nonetheless in its infancy.
Regardless, 2022 was one for the crypto historical past books.
The way it began
The advertisements had been in all places — on TV, on bus stops, and even in fortune cookies. Crypto firms spent tens of hundreds of thousands of {dollars} on advertising and marketing, swamping the Tremendous Bowl with commercials. The currencies and tokens might have been digital, however crypto grew to become extra actual for a lot of Individuals within the early months of the yr.
The business appeared to succeed in “peak hype” in January and February, says Molly White, a fellow at Harvard College who’s a crypto skeptic. She runs the positioning Web3 is Going Simply Nice.
“Costs had hit all-time highs,” she says. “Folks had been making irrational quantities of cash.”
The worth of probably the most well-known cryptocurrency — bitcoin — had simply set a document, and the business was making an attempt to “mainstream itself,” as White places it. Which means, crypto firms had been doing all they may to herald extra prospects.

A statue of Satoshi Nakamoto, a presumed pseudonym utilized by the inventor of bitcoin, is displayed in Graphisoft Park in 2021 in Budapest, Hungary. The statue’s creators, Reka Gergely and Tamas Gilly, used anonymized facial options, as Nakamoto’s true identification stays unconfirmed.
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Janos Kummer/Getty Photos

A statue of Satoshi Nakamoto, a presumed pseudonym utilized by the inventor of bitcoin, is displayed in Graphisoft Park in 2021 in Budapest, Hungary. The statue’s creators, Reka Gergely and Tamas Gilly, used anonymized facial options, as Nakamoto’s true identification stays unconfirmed.
Janos Kummer/Getty Photos
A lady higher recognized for setting trend tendencies than monetary ones, Paris Hilton, appeared on The Tonight Present Starring Jimmy Fallon in January. After speaking about her current marriage and journey to Burning Man, the previous actuality TV star went deep on the NFTs, or non-fungible tokens, she was hawking.
The viewers appeared a bit perplexed when she promised, Oprah-style, to present every of them an NFT — one other type of digital asset that’s mainly cartoony crypto artwork. However when Fallon, who’s himself an NFT fanatic, appeared blown away, they applauded.
“Peak hype,” although, crested rapidly.
The way it’s going
Like nearly every little thing else in finance, crypto noticed its costs tank when the Federal Reserve began to boost rates of interest to battle excessive inflation.
That shocked a lot of bitcoin’s largest backers, a lot of whom believed the digital forex can be an inflation hedge, like gold. That they had predicted bitcoin’s worth would rise throughout a interval of excessive inflation; as a substitute, it was falling.
What’s referred to as a “crypto winter” — a downturn that has gone on and on — started earlier than 2022 even reached its midway level.
“, we have been residing within the ‘crypto winter’ for the higher a part of a yr,” says Lee Reiners, who teaches cryptocurrency legislation at Duke College.

Particular person traders have been damage, particularly individuals who purchased digital property close to the highs. However in keeping with Reiners, the crypto winter additionally revealed bigger, systemic issues within the business.
“It actually uncovered various crypto corporations who had been, , overextended, had poor threat administration, or in any other case had been partaking in fraudulent exercise,” he says.
A string of failures began in Could: a pair of cryptocurrencies referred to as Terra and Luna, the buying and selling platform Voyager, a crypto hedge fund referred to as Three Arrows Capital, BlockFi, Celsius …
The record goes on and on, and in keeping with Reiners, it highlights one thing troublesome about crypto.
“These corporations are deeply interconnected, and so, the second you type of have one downside someplace within the crypto sector, it spreads very, in a short time,” he says.

Monetary regulators began to crack down, as effectively. They even went after one other big-name celeb for the way she touted “EMAX tokens.” None aside from Kim Kardashian needed to settle with the Securities and Trade Fee in October for greater than $1 million.
And what’s subsequent
Which brings us to FTX.
Initially of 2022, the crypto firm was valued at $32 billion. Now, it is bankrupt, greater than 1,000,000 individuals are nervous the cash they put into it has vanished, and the corporate’s founder, Sam Bankman-Fried, has been charged with legal fraud.

FTX’s new CEO, John J. Ray III, testifies in the course of the Home Monetary Providers Committee listening to on the corporate’s collapse.
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FTX’s new CEO, John J. Ray III, testifies in the course of the Home Monetary Providers Committee listening to on the corporate’s collapse.
Nathan Howard/Getty Photos
Bankman-Fried cultivated a picture that made him memorable and seemingly accessible, with wild hair and a penchant for carrying shorts and T-shirts. His purpose was to get extra on a regular basis folks to purchase crypto and extra standard Wall Avenue corporations and funds to put money into it.
The 30-year-old was so profitable at bringing crypto to the plenty that he was thought of the business’s unofficial spokesman. He is at present beneath home arrest at his dad and mom’ dwelling in Palo Alto, Calif.

Reiners calls the swift and whole collapse of FTX “the largest occasion in crypto’s historical past” — a historical past, he provides, that is “replete with plenty of failures and scams and frauds and hacks.”
Now, individuals are questioning what might be the following domino to fall.
Binance is the world’s largest cryptocurrency alternate, and after a number of large waves of panic-driven withdrawals, it appears prefer it has the potential to be that domino.
However the firm is pushing again in opposition to fears and crypto skepticism, extra usually. It has to, mentioned White.


“If folks begin to query the business as a complete, or crypto as an asset class, that’s devastating for Binance,” she says. “So, they’re doing something they’ll to stop that from taking place.”
For a lot of, it is disorienting to see how rapidly crypto’s fortunes reversed, and they’re struggling to gauge the depth of the injury from FTX.
“I feel crypto can be fortunate if all they had been set again [was] by a few years,” White says.
True believers anticipate bitcoin will bounce again and this “crypto winter” will thaw ultimately.
However for individuals who weren’t deep into crypto — who possibly noticed an advert or who had been pushed by a concern of lacking out to dabble in shopping for tokens — it is a completely different story, particularly with each day revelations from Bankman-Fried’s former co-workers about how buyer cash was allegedly moved out of FTX and into their very own pockets.
“I feel individuals are beginning to think about crypto as this large rip-off that they’d not need something to do with,” White says.
And that poses an existential downside for crypto, she provides. As a result of, for it to work, it requires an ever-larger stream of individuals to maintain shopping for it.