Today marks a full year since a critical juncture in the world of Web3. The date: May 14, 2022. The global crypto market was experiencing an unprecedented downturn, with impacts reverberating throughout the ecosystem. This retrospect aims to highlight key events of that era, providing insights into how far we’ve come.
A Dark Hour for LUNA and UST
On this day a year ago, Terra’s LUNA and its stablecoin UST were in freefall. The tokens were shedding a combined $50 billion in market cap, a scene of chaos that left many investors in shock. Despite the turmoil, Do Kwon, founder of Terra, was undeterred. Demonstrating conviction in his project, he deployed more capital into the beleaguered ecosystem, a bold move that would later bear fruit. Prominent news platforms like Bloomberg highlighted the ramifications it would have on the Blockchain industry.
Bitcoin, the anchor of the crypto world, was not spared from the havoc. Its price crashed from $40K to $30K, triggering panic across the crypto universe and liquidating over $1.2 Billion for derivatives traders. The drop, however, was a stark reminder of the volatility inherent in the crypto space, and an essential lesson for the many new entrants lured by the promise of quick gains.
FTX and Alameda Research's Struggle
FTX, the high-profile crypto exchange, was on the brink, solvent only on paper. Sam Bankman-Fried (SBF), FTX’s founder, was on a mission to rescue his empire. He was redirecting funds to Alameda Research, FTX’s sister company, in a desperate bid to keep it afloat. The funds transfer, while controversial, was a bid to stave off collapse – at least for the time being.
3AC, Celsius, Voyager, and BlockFi: Calm Before the Storm
Elsewhere in the ecosystem, things seemed to be going well – on the surface. Multistrat fund 3AC, crypto lending platforms Celsius and Voyager, and BlockFi, the crypto wealth management and lending platform, all appeared financially sound, despite the market turbulence. However, the health of these entities, much like FTX, was on paper – a facade that would soon be unveiled.
Ethereum's POW Era
A year ago, Ethereum was still running on the proof-of-work (POW) consensus mechanism, a resource-intensive method that had drawn criticism for its environmental impact. The transition to the more efficient proof-of-stake (POS) was yet to materialize, a switch that we now know has brought significant improvements to the network’s scalability and sustainability.
Crypto Twitter's Health Check
Crypto Twitter (CT), the vibrant community of crypto enthusiasts, traders, and influencers on Twitter, was still relatively healthy despite the market woes. The STEPN Ponzi scheme hadn’t collapsed yet, an event that would later create ripples of mistrust and skepticism throughout the community.
One year ago, the crypto space was on shaky ground. Market turbulence, solvency issues, and an impending Ponzi scheme collapse painted a picture of an industry teetering on the brink. However, as we’ve seen, the ecosystem has shown remarkable resilience. It’s weathered the storm, evolving and improving in the process. It’s a testament to the staying power of decentralized technology and the communities that support it.
Looking back, we can see these trials as necessary growing pains. They’ve served as stark reminders of the volatility and risks associated with the crypto space, but also as catalysts for change and improvement. Here’s to the next year of growth, innovation, and resilience in the world of Web3.