To say that 2022 hasn’t been all bad is like saying that Jim Cramer isn’t always wrong – by the law of averages, he’s going to be right a few times. The crypto world hasn’t experienced a year like this since 2018, with price action very much accentuating the negative as the 2019-21 bull market came to an end, leading to the usual collapse in prices and sentiment across the board.
Our four-part review of 2022 looks back at the top stories that shaped the cryptocurrency world this year, starting with January-March, in which DeFi bridge Wormhole was hacked for $320 million, KPMG Canada bought some BTC and ETH, the 2016 Bitfinex launderers were unmasked, Bitcoin nearly got banned in the EU, and there was the little matter of Russia invading Ukraine.
Parts two, three, and four will be winging their way to you this week. Enjoy.
Bitcoin started the year at $47,000, its highest ever yearly open, despite a $22,000 collapse in the preceding weeks. It didn’t get much better through the month either, continuously falling through levels of support down to $33,000, ending the month at $38,200.
Fortunately the fundamentals around Bitcoin weren’t matching the price action, as AirBNB revealed that it was considering accepting bitcoin and other cryptocurrencies, while payment giant MoneyGram announced the purchase of a 4% in crypto payment operator CoinMe. It wasn’t all positive however, as the influence of the mainstream media’s anti-crypto bias was laid bare when Mozilla was forced to back down over accepting crypto donations following massive criticism from influential individuals on Twitter.
Talk of the Federal Reserve reigning back its COVID spending caused legacy markets to wobble this month, with Bitcoin’s drops reflecting its position within the traditional financial system and pointing to a dark 2022. Russia didn’t help matters when its central bank called for cryptocurrency usage and mining to be banned in the country, before two other ministries called for regulation of the sector instead, saying that a ban would be counterproductive.
NFTs continued to enjoy their moment in the sun, with Mastercard and Coinbase announcing a partnership to make buying the digital assets on Coinbase’s imminent Coinbase NFT platform easy peasy. It also emerged this month that some OpenSea users were taking advantage of sellers’ lackadaisical listing cancellation activity when they started snapping up Bored Ape Yacht Club NFTs at a fraction of their retail value and re-listing immediately for quick six-figure profits.
Facebook owner Meta had an eventful month, joining the Open Crypto Patent Alliance (much to Craig Wright’s chagrin) and then quietly selling off the remnants of its stablecoin project Diem (formerly Libra) to Silvergate Capital for $200 million. This ensured what we had all known…well…since the day it was announced in 2019 – chiefly that Libra would never see the light of day.
January ended with a mammoth $320 million hack on DeFi bridge Wormhole, one of the biggest DeFi hacks seen to date, which was down to an issue with the smart contract. Thankfully Wormhole was backed by exchange giant FTX, so the $320 million was quickly replaced. Alright for some.
February started with efforts to amend an element of a congressional bill that would have been damaging to the cryptocurrency industry in the U.S. (sound familiar?). This time it was the turn of the America COMPETES Act which, had it passed with no amendments, would have allowed the Treasury secretary brand new powers to act against entities they considered to have illegally processed transactions, be they fiat or cryptocurrency.
A familiar face to those in touch with the QuadrigaCX scandal popped up this month as treasurer of DeFi darling Wonderland, the name behind a clutch of DeFi projects and home to the self-styled ‘frog nation’. Michael Patryn, who left QuadrigaCX before it folded owing customers millions, is a convicted fraudster, and this news when it emerged did not go down with the Wonderland faithful, who, worried that he might steal money from the Wonderland treasury, quickly voted to oust him.
Patryn, in revenge, stole millions from the Wonderland treasury.
Crypto enjoyed an adoption boost this month when KPMG Canada added Bitcoin and Ethereum to its corporate treasury, following in the footsteps of MicroStrategy and Tesla. The company said at the time that its purchase of the two cryptocurrencies reflect its belief that “institutional adoption of cryptoassets and blockchain technology will continue to grow and become a regular part of the asset mix.”
The Bitfinex hack of 2016 made an unexpected comeback this month as U.S. law enforcement caught up with two people it suspected of laundering the stolen bitcoin and perhaps being responsible for the hack itself. Ilya Lichtenstein and his wife Heather Morgan were arrested in New York after a Walmart gift card bought with cryptocurrency from a wallet associated with the ₿119,754 hack was linked to them, but this was just the start of it.
Morgan was something of a crypto and social media personality, living life as a ‘rapper’, boasting about how she turned her small business into one turning over tens of millions of dollars, and even writing about cryptocurrency exchange security in Forbes. Her larger than life profile made her status as a multi-million dollar money launderer all the more staggering in a story that lit up the crypto and non-crypto worlds alike.
February also saw another famous 2016 event come back to life, with author and blockchain journalist Laura Shin fingering TenX co-founder Toby Hoenisch as the man behind the draining of the Ethereum DAO in 2016. Hoenisch denied his involvement.
U.S. authorities scored a double kill this month when the last of the three BitMEX co-founders, Arthur Hayes and Benjamin Delo, pled guilty to violating the Bank Secrecy Act with regard to their operation of the casino that was BitMEX. The pair, who were handed $10 million fines each over actively avoiding having KYC regulations in place on the exchange, avoided jail thanks to the plea deal.
The last week of February was all about one thing – Ukraine. Russia invaded the sovereign nation on February 24 after weeks of build up, and cryptocurrency was thrust into the limelight, highlighting its growing influence in the world of finance. Swift and harsh sanctions were immediately applied to Russia, leading to concerns that sanctioned Russian oligarchs would use cryptocurrency to evade them.
Such a suggestion was immediately discounted by cryptocurrency experts, given the liquidity needed to transact billions of dollars worth of digital assets simply doesn’t exist, but it was clear that the issue was far from over.
March began with the publication of the much anticipated Executive Order on cryptocurrencies from the Biden administration, but those looking for some explosive revelations were disappointed – there was no ban, or even immediate action. Instead, the order had the intention of merely outlining the U.S. government’s strategy for cryptocurrencies, meaning another bullet had been dodged…for now.
In another show of its disdain for all things crypto, the UK’s financial watchdog the Financial Conduct Authority ruled that all Bitcoin ATMs operating in the UK were doing so illegally and must be withdrawn. This was because no Bitcoin ATM operators had been granted a license, meaning they were no longer allowed to operate in the country.
There was better news for American crypto ATM users this month however when it was announced that Dogecoin was going to be added to the 1,800 machines operated by the country’s biggest ATM operator, meaning Elon Musk’s adopted cryptocurrency would get to experience a taste of the high street.
The EU Parliament rose from crypto obscurity this month to become a potentially destructive factor in cryptocurrency in the EU on two fronts. First, it slipped in a vote on whether to ban proof-of-work cryptocurrencies from sale in the bloc, a proposal that was narrowly voted down. However, the die was nevertheless cast – the knives were out for PoW.
Two weeks later, the EU Parliament was asked to vote on another crypto ruling – whether to ban anonymous cryptocurrency wallets. This vote had its roots in a set of regulations first introduced in 2019 but that had barely been implemented by EU countries. In the end, a total ban on anonymous wallets was averted, but their use case was heavily diminished – any user of a private, non-custodial wallet sending to or receiving funds from an account on an exchange would have to prove their identity before the transaction can take place.
Instagram fulfilled its dessssstiny this month by informing the world that it was working on a way to integrate NFTs, with Meta android-in-chief Mark Zuckerberg announcing that he was “working on bringing NFTs to Instagram in the near term”. Zuckerberg also added that users might be able to mint NFTs on the site in the future, another sign of the sector’s growing adoption.
Craig Wright added another mark to the ‘lost’ column of his lawsuit tally chart this month when his claims against a cabal of cryptocurrency developers over the infamous ‘pineapple hack’ were thrown out due to their lacking any merit whatsoever. Wright was trying to get his hands on $3.2 billion worth of BTC, BCH, and BSV he says was stolen from him in February 2020 but that actually sits in a wallet used to siphon funds from Mt. Gox. The judge, thankfully, ruled he had no case.
The ruling also confirmed that blockchain developers are not ‘fiduciaries’ who have a burden of responsibility for users’ funds, which everyone sensible knew anyway.
The major talking point of March came right at the end of the month when hackers breached the paper-thin walls surrounding the Ronin blockchain bridge and stole $540 million worth of coins from it…without anyone knowing. In fact, this was not picked up on for six days, and when it did break the news made global headlines, seeing as it was one of the biggest crypto hacks of all time.
It turned out that hackers had managed to socially engineer their way into getting hold of enough of the nine validator keys to confirm transactions themselves, which they gratefully did. Worse, it turned out that North Korean grup Lazarus was behind it, with the funds going straight to the rogue state’s missile program.
The Bear Wakes Up
Bitcoin started 2022 at $47,600 and the first quarter at…$47,400, showing pleasing strength following a January drop to $33,000. However, the writing was on the wall for the crypto markets, as it was clear a bear market was imminent.
Check back tomorrow for part two of our four-part review of cryptocurrency in 2022.