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Year: 2022

Deep State

Crypto 2022: A Disastrous Year That Saw Few Winners Among A Sea Of Losers

Crypto 2022: A Disastrous Year That Saw Few Winners Among A Sea Of Losers

Authored by Prashant Jha via CoinTelegraph.com,

2022 was supposed to be the year crypto went mainstream, with a significant chunk of traditional venture capital firms betting heavily on the ecosystem in 2021. However, with one disaster after another, 2022 turned out to be a catastrophic year for the nascent crypto ecosystem. Some of the biggest names touted as pivotal to taking the crypto ecosystem forward turned out to be the orchestrators of its worst year in recent memory.

That said, quite a few protagonists rose to the occasion. These winners proved that crypto is not just about a few select individuals and companies but a vibrant ecosystem that can survive significant setbacks.

Let’s start with some of the biggest winners of the crypto ecosystem in 2022. The list includes individuals, companies and anonymous groups working for the betterment of the industry.

The winners

In a year that saw the multibillion-dollar collapses of the Terra ecosystem, FTX and Three Arrows Capital, it’s hard to pick winners. However, crypto has faced adversaries before, and 2022 was no different. Several positives came out of the year despite the collapse of several centralized entities.

Ledger and Trezor

When Satoshi Nakamoto created Bitcoin, a core idea was to give people financial sovereignty that made them less dependent on centralized intermediaries.

With offers of lucrative interest rates on yield products and derivatives trading services, most crypto users preferred to keep their crypto assets on centralized exchanges. However, these lucrative offerings become a nightmare when millions of customers lose their funds in the wake of a centralized exchange collapse.

In the rubble of the FTX collapse, crypto investors lost trust in centralized exchanges. Hardware wallet providers like Ledger and Trezor have benefitted from investors shifting their behavior toward self-custody.

By December, self-custody services and hardware wallets became the preferred choice of many. After the collapse of FTX, Trezor saw a 300% surge in sales and revenue and Ledger saw its biggest sale day ever.

White hat hackers

The crypto ecosystem is relatively new, and several use cases like decentralized finance (DeFi) are in early development. This makes it prone to bugs and exploits. According to DefiLlama, DeFi protocols were exploited for nearly $5.93 billion in 2022

Total value hacked (USD) from DeFi protocols in 2022. Source: DefiLlama

However, the figures would have been much higher if not for white hat hackers. These white hats returned millions of dollars in stolen funds and flagged security bugs that could have led to more exploits. Security service provider Immunefi claims to have prevented the theft of $20 billion worth of crypto assets alone through its bug bounty program for white hat hackers..

While many projects tend to ignore white hats, 2022 showed that it’s better to pay out millions in bug bounties than lose billions in exploits.

Tether

Amid the chaos of 2022, the Tether stablecoin has successfully manoeuvred its way through the wreckage of both the Terra and FTX collapses.

USDT price and volume on a 1-year chart. Source: CoinMarketCap

The centralized stablecoin has been at the forefront of critics’ commentary for as long as it has existed. When Terra’s native stablecoin depegged, there were rumors about Tether’s exposure to the doomed ecosystem.

However, USDT managed to overcome the scare, and throughout 2022, it has significantly decreased its volatile exposure. The firm also pledged to stop lending out funds from its reserves and put a full stop to all the fear, uncertainty and doubt, or FUD.

Tether has become more transparent over time, with 82% of its reserves in liquid assets. The firm had total assets of $68.06 billion at the end of the third quarter, exceeding its total liabilities of $67.8 billion.

The losers

The crypto ecosystem saw many losers in 2022, with Sam Bankman-Fried the first to earn a mention. The former CEO of crypto exchange FTX started 2022 with a $20 billion net worth. In less than a year, that net worth disappeared and Bankman-Fried is now out on bail for allegedly stealing customers’ funds and committing securities fraud. Terra’s co-founder Do Kwon, whose last known location was Serbia, also makes the list.

TerraUSD

Algorithmic stablecoins were a novel, promising concept during the bull market. The Terra ecosystem rose to new highs based on this hype. However, the flawed design of TerraUSD (UST), now known as TerraClassicUSD (USTC), aided by the reckless decision-making of Kwon, led to its eventual downfall. The failure of Terra’s native stablecoin also tainted the concept of algorithmic stablecoins, with regulators warning against them.

The collapse of UST obliterated $40 billion of investor capital and caused a contagion that claimed nearly half a dozen other crypto firms with exposure to Terra. While many firms and individuals could qualify in the losers list, Terra’s UST implosion was the catalyst that precipitated more upheaval in 2022.

Alameda Research, FTX and centralized exchanges

At the start of 2022, FTX was valued at $32 billion, while its sister company Alameda Research boasted a several-billion-dollar valuation of its own. However, the November bank run on FTX soon turned into bankruptcy. As more details emerged, it turned out FTX and Alameda Research were not as independent as they claimed. Even FTX US, which was supposed to be a separate entity regulated under United States law, was found to be embroiled in the complex saga.

According to the authorities, FTX and Alameda funneled funds to each other, and the two firms were also involved in the embezzlement of customers’ funds. Alameda used FTX funds to loan billions of dollars to other firms. FTX, on the other hand, used nonexistent in-house projects with inflated valuations as collateral to take out significant loans. The whole Ponzi came crashing down in November.

The downfall of FTX and Alameda created more contagion in the crypto ecosystem and single-handedly erased trust in centralized exchanges and the broader crypto ecosystem practically overnight.

Crypto investors

Among all the chaos and downfall of many crypto exchanges and leading venture capital firms, the biggest losers are crypto investors. If the burn of the bear market was not enough, millions of crypto investors who had their funds on FTX lost their life savings overnight.

Terra was once a $40 billion ecosystem. Its native token, LUNA — now known as Terra Classic (LUNC) — was one of the top five biggest cryptocurrencies by market capitalization. With millions of customers invested in the ecosystem, the collapse brought their investment to zero within hours. After the Terra collapse, crypto investors lost their funds on a series of centralized exchanges and staking platforms like Celsius, BlockFi and Hodlnaut. Crypto investors also lost significantly in the nonfungible token market, with the price of many popular collections down by 70%. Overall, crypto investors are among the biggest losers of the year.

2022 will go down in crypto history as an annus horribilis. Crypto investors will want to forget the year and start fresh. Venture capital firms and investors in crypto projects are reevaluating their investment strategies. After such a tumultuous year in crypto, a likely outcome will be the acceleration of regulations in the industry throughout the coming year. This may restore some of the lost confidence in the industry.

Tyler Durden
Sat, 12/31/2022 – 18:40

Deep State

Russian Military Says Victory “Inevitable” In New Year Message

Russian Military Says Victory “Inevitable” In New Year Message

A New Year message issued by the Russian defense ministry declared that it sees victory in Ukraine as “inevitable” – even after the Russian ground forces’ advance in the east in south has appeared stalled for months, and as aerial forces take aim at the national power grid across Ukrainian cities.

“In the coming year, I want to wish everyone good health, fortitude, reliable and devoted comrades… Our victory, like the New Year, is inevitable,” Defense Minister Sergei Shoigu said in a Saturday video address soon before Russia rings in the new year.

Sputnik via AP

The military campaign is now it its 11th month, and will reach one full year on Feb.24. Shoigu explained that 2022 included times that “we all faced serious trials” and that the New Year has come during a “difficult military-political situation.” 

“The outgoing year will forever enter the military chronicle of the Fatherland, filled with your immortal deeds, selfless courage and heroism in the fight against neo-Nazism and terrorism,” Shoigu said.

“We will always remember our comrades who sacrificed themselves while performing combat missions in the name of saving civilians from genocide and violence only for the right to speak Russian,” he added. In mentioning the “right to speak Russian” – he was referencing a crackdown on Russian culture and language, which has included recent moves to push forward new laws, by the Zelensky government which Moscow had complained about even before the war.

Two weeks ago, Russia admitted to just 5,937 military deaths in Ukraine, despite some Western estimates putting the figure as high as 100,000. Estimates of Ukrainian troop deaths are also difficult to assess accurately.

Recently, the US military said it estimates that some 200,000 have been killed on both sides. Citing the US Joint Chiefs chairman, a November report gave the following grim tally and breakdown:

The most senior US general estimates that around 100,000 Russian and 100,000 Ukrainian soldiers have been killed or injured in the war in Ukraine.

Gen Mark Milley, chairman of the US Joint Chiefs of Staff, also suggested that around 40,000 civilians had died after being caught up in the conflict.

The estimates are the highest offered yet by a Western official.

This past week, the United Nations updated its numbers of civilian casualties over the course of the war since Feb.2022. An OHCHR press release cited a total number of 17,831 civilian casualties in Ukraine, including 6,884 killed and 10,947 injured. 

For now the conflict remains essentially stalemated, with Russia exercising clear air superiority given it has of late been ramping up airstrikes against Ukraine’s energy infrastructure – but with Ukraine forces receiving more and more powerful, longer-range weapons from the West. The US says Patriot anti-air missiles are en route, but these are expected to take six months minimum to go operational in the country.

Tyler Durden
Sat, 12/31/2022 – 18:05

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