From Terra’s Collapse to Crypto’s Resurgence: A Journey Through the Crypto Industry
Do you remember the turmoil caused by Terra’s collapse? It all started with Do Kwon’s layer 1 design, where the native token LUNA was intricately linked with the network’s algorithmic stablecoin, UST. The system worked smoothly as long as UST had high demand, but things took a drastic turn in May 2022 when UST lost its $1 peg, leading to a chain reaction of events that wiped out over $40 billion in market value in just 72 hours.
The Fallout
Terra’s collapse sent shockwaves through the crypto industry, resulting in the demise of several key players. Crypto hedge fund Three Arrows Capital and lenders like Voyager, BlockFi, and Celsius all faced significant losses. The U.S. sanctions on Ethereum’s Tornado Cash added to the chaos, causing panic among developers worldwide.
The Downfall of FTX and Regulatory Crackdown
The downfall of FTX and Alameda further exacerbated the situation. Reports of fraudulent use of customer funds by SBF led to FTX filing for bankruptcy, with Bankman-Fried facing arrest and a 25-year prison sentence. This, coupled with SEC Chair Gary Gensler’s aggressive campaign against crypto firms, marked the beginning of a period of intense regulatory scrutiny.
A Turn of Events
Despite the challenges, the crypto industry saw a resurgence. BlackRock’s filing for a spot bitcoin ETF in June 2023 signaled Wall Street’s growing acceptance of crypto. Grayscale’s victory over the SEC in converting its bitcoin trust into an ETF paved the way for the approval of multiple spot bitcoin ETFs in January 2024, becoming some of the most successful new ETFs.
Political Shifts and Industry Support
The political landscape also played a significant role in shaping the industry’s future. Trump’s victory in November 2024 brought a wave of changes, with the administration showing a friendlier stance towards crypto. The passing of the GENIUS Act and the impending approval of the Clarity Act signaled a new era of regulation for the sector.
The Rise of Bitcoin and Industry Success Stories
Amidst these developments, bitcoin’s price soared, reaching new heights. Companies like Coinbase, Tether, and Circle saw unprecedented success, while figures like Michael Saylor led the charge in bitcoin evangelization. The total market capitalization of the crypto sector surged to nearly $4 trillion, reflecting the industry’s resilience and growth.