However, there is no central organization in the cryptocurrency ecosystem to facilitate recourse against the seller. In a typical centralized transaction, if the good or service is defective, the transaction can be canceled and funds returned to the buyer. The pseudonymous and unregulated nature of blockchain and Bitcoin transactions also raises concerns when transactions need to be disputed. Many initial coin offerings (ICOs) are also suspect, particularly for cryptocurrencies with speculative business models, and have been widely criticized as scams as well. In 2022 alone, some of the most revered players responsible for keeping digital currencies functioning have been charged with crimes such as fraud-including Sam Bankman-Fried of FTX Do Kwon, head of Terraform Labs, the parent company of TerraUSD and LUNA and Su Zhu and Kyle Davies of Three Arrows Capital.Īlso in 2022, criminals generated 117,000 scam tokens, robbing investors of billions of dollars. While this demonstrates that instability is endemic to crypto, it also shows that the technology and currencies are resilient. Well before these nosedives, the crypto market had already crashed several times, including in 2021, 2020, 2018, 2013, and earlier, largely due to investor speculation and media hype.
While the collapse paralleled a decrease in cryptocurrency prices, other factors like high-profile scams and market oversaturation also played a significant role. The most popular NFTs, like Bored Ape Yacht Club and CryptoPunks, saw their prices slashed by more than half in August 2022. The crypto crash also brought down the NFT market. Coinbase laid off almost 1,000 employees in connection with the fallout from the crash. also froze withdrawals of the stablecoins USDC and Tether (USDT), the values of which are based on the US dollar. Other major exchanges have also been affected by the fall of FTX: BlockFi froze withdrawals, as did Gemini’s third-party lending partner, Genesis Global Capital. The volatility of the crypto market in the five years since crypto’s 2018 heyday is reflected here.
The CoinDesk Market Index is a broad-based index designed to measure the market-capitalization-weighted performance of the digital asset market. Then, in November of the same year, crypto exchange FTX crashed due to insufficient liquidity, mismanagement of funds, and excessive withdrawals from unnerved investors-depressing the value of its token, FTT, as well as those of numerous other cryptocurrencies, including Bitcoin and Ethereum. In May 2022, the digital stablecoin TerraUSD and the algorithmic stablecoin tied to it, LUNA, crashed, tanking the crypto market and causing investors to lose more than $400 billion. Many crypto tokens are volatile and vulnerable to scams, but even those advertised as stable and supposedly backed by assets to ensure their value have collapsed. Even for crypto-enthusiasts, there are multiple factors that might be keeping them awake at night. The majority of Americans don’t trust the safety and reliability of cryptocurrencies, according to a 2023 Pew Research Foundation study. Current Issues in the Cryptocurrency Market I also provide a longer-range overview of the nature of crypto, its regulatory and accounting treatment, and what potential investors need to know as they consider this volatile sector. In this article, I detail some of the controversies and crises that have characterized the crypto market in recent years.
Also commanding attention are the noncrypto possibilities of the blockchain technology underlying the coins, which has powerful applications in various sectors, from healthcare to media to supply chain management. The global cryptocurrency market cap exceeded $1 trillion as of May 2023. And the environmental toll of crypto’s energy-intensive computing demands is alarming to consumers and governments alike.ĭespite these concerns, optimism remains high among enthusiasts. Fiduciary responsibility, regulation, and oversight are still lacking in the sector. The challenges are considerable: Hype, bubble mentalities, and fraud have periodically inflated digital currencies’ values over the years. Anyone considering investing in the space should make sure they have a solid foundation in both crypto’s challenges and possibilities. The cryptocurrency market crash of 2022 has reinforced ongoing concerns about crypto’s future, even as many investors still maintain a high level of interest in digital assets.
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