2022 was crypto's annus horribilis. The Terra/Luna collapse wiped $60 billion in days. Celsius Network froze withdrawals and went bankrupt. Three Arrows Capital, once the largest crypto hedge fund, imploded. And in November, FTX — the world's second-largest crypto exchange — collapsed in 72 hours, taking $8 billion in customer funds with it. The year destroyed $2 trillion in market cap and exposed the industry's deepest structural flaws.
The Terra/Luna Collapse: May 2022
TerraUSD (UST) was an algorithmic stablecoin designed to maintain its $1 peg through a complex relationship with its sister token Luna. When UST held its peg, Luna was burned to create UST. When UST lost its peg, UST was burned to create Luna — theoretically restoring the peg.
In May 2022, a coordinated attack (or large redemption) broke UST's peg. As UST fell below $1, the algorithm minted billions of Luna to restore the peg — hyperinflating Luna's supply and destroying its value. UST fell to $0.02. Luna fell from $80 to $0.0001. $60 billion in value was destroyed in 72 hours. Hundreds of thousands of retail investors lost their life savings.
The Contagion: Celsius, Voyager, Three Arrows Capital
The Luna collapse triggered a cascade of failures across the crypto ecosystem. Three Arrows Capital (3AC), which had $200 million in Luna exposure, became insolvent. 3AC's collapse triggered margin calls across the industry — Celsius Network, Voyager Digital, and BlockFi all had significant 3AC exposure.
Celsius, which had promised retail depositors 18% annual yields on crypto deposits, froze withdrawals on June 12, 2022. It had been lending customer funds to DeFi protocols and 3AC — a classic maturity mismatch that collapsed when the market turned. Celsius filed for bankruptcy in July 2022 with a $1.2 billion hole in its balance sheet.
The FTX Collapse: November 2022
FTX's collapse was the most shocking because its founder, Sam Bankman-Fried, had positioned himself as crypto's responsible adult — testifying before Congress, donating to political campaigns, and publicly advocating for regulation. A November 2 CoinDesk article revealed that FTX's sister trading firm Alameda Research held $5.8 billion of FTX's own FTT token as its primary asset.
Binance CEO CZ announced he would sell all of Binance's FTT holdings. FTT collapsed. Customers rushed to withdraw from FTX. Within 72 hours, FTX had a $8 billion liquidity hole. On November 11, FTX filed for bankruptcy. SBF was arrested in December and convicted of fraud in November 2023.
The Regulatory Aftermath and Market Recovery
The 2022 collapses accelerated global crypto regulation. The EU's MiCA framework was finalised. The US SEC launched enforcement actions against major exchanges. Ironically, the regulatory clarity that followed — combined with the approval of spot Bitcoin ETFs in January 2024 — helped restore institutional confidence.
Bitcoin bottomed at $15,500 in November 2022 and reached $73,000 by March 2024 — a 371% recovery. The lesson: crypto's worst crises have historically created the best long-term buying opportunities for those who survived them.
✅ Key Takeaways
- Terra/Luna's algorithmic stablecoin destroyed $60 billion in 72 hours in May 2022
- Three Arrows Capital's collapse triggered a cascade of bankruptcies across crypto
- FTX collapsed in 72 hours after CoinDesk revealed Alameda's FTT-heavy balance sheet
- Total crypto market cap fell from $3T (Nov 2021) to $800B (Nov 2022)
- Bitcoin bottomed at $15,500 in Nov 2022 and recovered to $73,000 by March 2024
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