Here are 8 crazy stories that rocked the crypto market last year.
1. The Fed raised interest rates, cryptocurrency prices plummeted
The Fed made huge interest rates rise in 2022 to combat inflation. Interest rates rose from near 0% in March to 4.5% 9 months later. As interest rates rise, savings accounts offer higher yields, meaning that holding cash is more attractive than investing in assets like stocks, real estate, and cryptocurrencies. Cryptocurrency prices began to drop in January, as investors worried about the Fed getting even tougher on inflation. In January alone, Bitcoin was down 19% and Ethereum was down 29%.
“Crypto assets suffered one of the worst years in 2022, as central banks struggled with soaring inflations, resulting in higher interest rates and weakening growth expectations. All of which left the crypto market nursing significant losses”, strategists at UBS said.
2. Crypto exchanges dominated Super Bowl LVI’s halftime ad slot
As digital assets surged in 2021, major exchanges like Coinbase, Crypto.com, and FTX have spent millions of dollars in advertising to attract users. In February, the three companies made an eye-catching ad on NBC’s Super Bowl LVI broadcast.
Coinbase’s simple ad showed a QR code bouncing around a screen for 60 seconds and a giveaway of $15 worth of Bitcoin sent people swarming to its platform, Crypto.com partnered with NBA basketball superstar LeBron James, while FTX’s “Don’t Be Like Larry/Don’t Miss Out” ad featuring Hollywood actor Larry David has caught the attention of those crypto skeptics.
After that, however, these companies have cut back on their sports advertising due to a fierce sell-off in the market last year.
3. Stablecoin TerraUSD Broke its $1 peg, Luna dropped to $0
By pegging value to a stable asset such as gold or a government-issued currency, such tokens offer crypto investors a safer place to deposit their cash. But on May 7, heavy selling of UST broke its dollar peg. UST suddenly plummeted and within days, it was traded at less than 10 cents.
Instead of holding reserves in dollars, Terra maintained the UST’s peg to the dollar through an algorithm. The software has supported the stablecoin’s value by mining and selling small amounts of Luna if UST slipped away from its $1 peg. When the UST crashed, the algorithm went into override, the market flooded with Luna. Luna price, therefore, dropped from a record high of $119.51 to zero within just a few days. According to blockchain research firm Chainalysis, crypto investors suffered a loss of $20.5 billion in just one week.
4. Celsius froze all customer funds
In June, crypto lender Celsius said it would freeze all customer withdrawals due to “extreme market conditions”. Bitcoin fell 15% below $23,000 following that announcement, while Celsius’ native token fell by a third to just 21 cents. Also in June 2022, Bitcoin fell below $20,000 for the first time since 2020, increasing its losses for the year to more than 60%.
(To be continued)
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