No doubt, 2022 has been a hectic year
for the global cryptocurrency industry. At the start of the year, the market capitalization of the global
cryptocurrency industry stood at $2.19 trillion dollars. However,
the market cap collapsed by 63% to about $820.7 billion by mid-June, bearing
scars of the wide turn of events that had taken the industry by
storm.
This trails back to 2021, when central banks across the
world implemented expansionary fiscal policies to boost economic recovery
following the battering of COVID-19. These measures boosted the growth of the digital asset
economy, leading to record highs for leading cryptocurrencies, such as Bitcoin and
Ether.
However, by early 2022, the apex
authorities begin to implement contractionary fiscal policies to combat global inflation, thereby killing investors’ appetite for speculative assets. On June 13, for instance, the stock market entered a bear market, witnessing one of its worst performances in 40 years. This change in the macroeconomic climate spelt doom for the cryptocurrency industry as the pressure on
traditional assets rubbed off its digital currency counterparts.
Source: CoinMarketCap
Following the breakout of the
Russian-Ukraine war in February and the role digital assets played in enabling
financial circumvention, came the first industry shock in March: the Axie
Infinity hack. The attack on the Ronin Network, the blockchain-based sidechain
that powers the non-fungible token-based online gaming video, saw hackers part way
with $625 million. Other hacks would follow in the year.
However, what truly shook the global
cryptocurrency industry was the collapse of the Terra-USD (UST) /LUNA.
In April 2022, TerraUSD capped its months-long growth, reaching a record high
of $119.20 in April. However, economic pressure took hold of the market and on
May 9, the UST started to fall below its $1 peg. By May 13th, the algorithmic
stablecoin had fallen as low as 35 cents for $1. The governance token LUNA,
which was used to maintain the stalecoin’s peg to the US dollar, also felt the
heat, sinking by 96% in a day to under 10 cents by May 12th.
Ryan Hansen, Head of Sales at Liquid Mercury
“The Terra Luna situation in the
spring was a poorly constructed stablecoin selling off steeply and quickly once
it lost its peg, and…
