The decline in value of most cryptocurrencies has occurred since the end of 2021. And even after more than a year since the phenomenon first occurred, the price of crypto shows no indication of recovering.
According to experts, this phenomenon is referred to as crypto winter, which is a period in which cryptocurrencies experience a significant decline over a long period of time. In the cryptocurrency world, this is not the first time. A similar phenomenon has also occurred in the period from January 2018 to December 2020.
At that time, bitcoin which had reached its highest level, $ 19,500, fell to touch the level of $ 3,300. The value only really recovered at the end of November 2021.
Unlike the previous crypto winter, this time the crypto winter didn’t only affect cryptocurrency assets. Even crypto companies were also affected, causing a number of companies to even go bankrupt.
Throughout 2022, there were 5 quite severe bankruptcy of crypto companies, including:
1. FTX
FTX is the third largest centralized crypto exchange by trading volume. The company was founded by Sam Bankman-fried together with Gary Wang in 2019.
FTX is one of the companies that went bankrupt in 2022. Not only that, the FTX bankruptcy case is also the worst among other crypto company bankruptcy cases.
On the surface, FTX’s bankruptcy was caused by the massive sale of FTT (the native token of the FTX derivatives trading platform), causing the token price to plummet. However, behind that, the initial trigger was the uncovering of the FTX fraud scheme with Alameda Research (the company owned by the founder of FTX). The two companies are believed to be manipulating the market to boost the value of FTT tokens by becoming insider trading.
The impact of FTX’s bankruptcy was not only felt by their platform users, but also by other companies affiliated with FTX. According to Katadata, there were a total of 130 crypto exchanges affiliated with FTX that went bankrupt.
2. BlockFi
BlockFi is a fairly popular Crypto trading platform. BlockFi offers crypto coin buying and selling services, as well as crypto exchange services. Apart from that, BlockFi also offers other types of crypto services, such as crypto storage (crypto wallet), crypto loans and also crypto rewards credit cards.
On November 14, 2022, BlockFi stated that withdrawals will be suspended and users are advised not to make deposits, either to BlockFi wallets or interest accounts. And on November 28, 2022, BlockFi announced its chapter 11 bankruptcy filing, which is filing for bankruptcy status with the option for the company to continue operating.
BlockFi’s bankruptcy is a result of the collapse of the crypto exchange FTX. The company has financial ties to FTX, and has even acknowledged having “significant exposure” to FTX.
3. Three Arrow Capital (3AC)
Three Arrow Capital (3AC) is a Singapore-based Cryptocurrency Hedge Fund. The company was founded by Kyle Davies and Su Zhu in 2011.
3AC is actually a fairly well-known cryptocurrency hedge fund company. This company once managed investment funds that reached $ 10 billion. However, due to the impact of the crypto winter, during which many crypto assets were in a bearish trend, 3AC ended up losing out.
Apart from that, another loss that 3AC experienced was the collapse of the LUNA. It is known that the company has invested $200 million in LUNA coins. And when the price of LUNA plummets, the company shows indications of financial distress.
In June 2022, Voyager Digital collected a $665 million loan they provided to 3AC. However, 3AC was unable to repay the loan. Voyager Digital announced that 3AC was in default on June 27, 2022 and on the same day a British Virgin Island court also ordered 3AC to be liquidated.
4.Digital Voyager
Voyager Digital is a cryptocurrency brokerage and lender company. The company was founded in 2018 and is headquartered in Singapore.
Voyager offers cryptocurrency asset trading services. They give users access to be able to buy and trade 100+ cryptocurrencies, ranging from bitcoin, DeFi coins, stablecoins and other types of altcoins.
Apart from that, they also provide crypto loans to parties in need. Voyager borrows crypto from its users at a rate of return of up to 12% and uses it to loan it back to others at higher interest.
Voyager Digital declared bankruptcy in July 2022. This is believed to be a result of 3AC’s bankruptcy. The reason is, Voyager Digital is one of the creditors of the 3AC company with a total of $665 million in defaulted loans. The latest news shows that Voyager has been acquired by Binance US for $1 billion US dollars.
5. Celsius Network
Celsius Network is a cryptocurrency company that offers investment and crypto lending services. The company is headquartered in New Jersey and operates globally.
Celsius was founded by Alex Manshinky with two of his colleagues, Daniel Leon and Nike Goldstein, in 2017. The company’s business model is savings and loans like conventional banking institutions.
In June 2022, the company stopped all transfers and withdrawals without giving a clear time limit. This was done because the cryptocurrency market conditions at that time were very extreme, where most crypto assets experienced a significant decline.
Celsius ultimately filed for chapter 11 bankruptcy in July 2022. In its bankruptcy report, Celsius stated they had a $1.2 billion deficit and still owed users $4.7 billion.
Celsius’ bankruptcy is allegedly because the company has invested a large amount into the LUNA coin. This assumption arises considering that in October 2021, the total assets managed by Celsius even reached $ 25 billion. However, after the LUNA crash, those assets shrank to $167 million.
The bankruptcy of crypto companies will certainly affect the cryptocurrency industry as a whole. It is even very possible to make investors even more distrustful of crypto assets. Even so, such events can also be a starting point for a better cryptocurrency industry. It could serve as a sort of reminder that the rules in the crypto industry are still too lax. So it needs improvement to avoid similar events in the future.