Like stocks, the value of several cryptocurrencies rose quickly during the Covid-19 pandemic in 2021. But the excitement waned this year, causing crypto prices to return to Earth. A series of collapses, culminating in the failure of FTX in November, did little to calm jittery investors.
The market value of Bitcoin, the most popular cryptocurrency, is now at less than a third of what it was at its peak in November 2021.
Regulators around the world, especially in India, maintained their tough stance and warned retail and institutional investors about the risks of putting money in cryptocurrencies. Reserve Bank of India governor Shaktikanta Das even predicted that the next financial crisis would occur due to private cryptocurrencies.
Here are the top stories that defined crypto in 2022.
1)
Sam Bankman-Fried and the FTX collapse
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Troubles mounted for the crypto world after an already volatile year after the dramatic fall of 30-year-old Sam Bankman-Fried’s cryptocurrency exchange FTX in November.
FTX, one of the largest crypto exchanges in the world, had seen a meteoric rise since 2019 but fell apart in a matter of days.
The trigger for the collapse was a CoinDesk article that revealed serious issues in FTX’s financials. Soon after it was published, the CEO of
Binance offered to bail out FTX as investors dashed to retrieve their funds from the platform.
When Binance pulled out of the deal, FTX’s fate was sealed.
The spectacular collapse put centralised crypto exchanges around the world under the spotlight as users began to demand “proof of funds”.
Also read: Indian crypto investors want more transparency from exchanges after FTX’s collapse
2) Next financial crisis will come from private cryptocurrencies: RBI governor
Reserve Bank of India (RBI) Governor Shaktikanta Das has time and again warned people against the risks cryptocurrencies pose.
Speaking at an event recently, Das said cryptocurrencies have no underlying value and pose risks for macroeconomic and financial stability.
This is not the first time that the RBI has highlighted the dangers of cryptocurrency, having banned banks from dealing with the sector in 2018. The Supreme Court overturned this ban in 2020.
Das has repeatedly warned investors not to invest in crypto, saying they have no underlying value.
3) Coinbase’s UPI mess
Just three days after launching its services in India in April, US crypto exchange Coinbase suspended support for Unified Payments Interface (UPI) payments on its app.
Coinbase first announced it would allow users to use UPI. However, users were later told the UPI payment option was “currently unavailable” after it came under the scrutiny of the National Payments Corporation of India (NPCI).
The NPCI later said it was “not aware” of UPI being used for purchasing crypto.
Later, Brian Armstrong, CEO and cofounder of Coinbase, said the company disabled its UPI services because of “informal pressure” from RBI.
4)
Ethereum’s Merge and jump in Ether trading volume
One of the criticisms of cryptocurrencies is that most of them consume a large amount of energy. As of this year, Ethereum isn’t one of those.
The world’s second most popular crypto blockchain underwent a major software upgrade that promised to slash the amount of energy needed to create new coins and carry out transactions.
The Ethereum blockchain merged with a separate blockchain thereby changing the way it processes transactions and how new ether coins are created.
The new system is said to have slashed the Ethereum blockchain’s energy consumption by 99.9%.
The Indian cryptocurrency exchanges witnessed a surge in trading volumes of Ether ahead of “The Merge”.
5) Stablecoins became unstable
While Bitcoin and Ether are the most widely covered cryptocurrencies, a different class of digital assets, known as stablecoins, briefly shunted them from the headlines this year, albeit for all the wrong reasons.
Billions were wiped off cryptocurrency markets in May, erasing all gains of the past year, thanks to stablecoins.
TerraUSD (aka UST) “broke its peg” to the dollar after investors seemingly lost faith in the project. Its collapse triggered a wider crypto crash, with bitcoin falling below $30,000 for the first time since July 2021 and dragging other top cryptocurrencies down with it.
Just two days later, Tether, the largest stablecoin of all, also broke its peg to the dollar, falling to as low as 94 cents.
6) Crypto blues hit exchanges in India
Regulatory uncertainty and subdued demand prompted Indian cryptocurrency players to look for alternate revenue streams in 2022.
CoinDCX and CoinSwitch Kuber were among those that explored opportunities in the Web3 ecosystem.
CoinSwitch Kuber is planning to launch trading of an additional asset class by January. It also launched a $10-million venture fund for Web3 startups in August.
