The last crypto bear market was triggered by a series of scandals and events that shook the confidence of investors and regulators in the crypto industry. Some of the biggest scandals that contributed to the market downturn were:
- The collapse of terraUSD (UST), an algorithmic stablecoin that was supposed to maintain a 1:1 peg with the U.S. dollar, but failed to do so in December 2021. The $USTC price dropped as low as $0.3, causing massive losses for holders and traders who used it as collateral or leverage on platforms like FTX. The incident also exposed the flaws and risks of algorithmic stablecoins, which rely on complex mechanisms and incentives to maintain their pegs, rather than being backed by real assets.
- The fraud lawsuit against Gemini, a major crypto exchange founded by the Winklevoss twins, who were accused of lying to customers about the risks of an investment account they offered, which paid high interest rates on crypto. The New York Attorney General alleged that Gemini misled investors about the safety and liquidity of the account, which was actually invested in risky and illiquid crypto assets, and failed to disclose the conflicts of interest and fees involved.
- The security breaches and hacks that targeted several crypto platforms and projects, such as Cream Finance, Badger DAO, BitMart, and Loopring $LRC . These incidents resulted in the theft or loss of millions of dollars worth of crypto assets, and raised questions about the security and reliability of decentralized finance (DeFi) protocols and smart contracts.
- The regulatory crackdowns and bans on crypto activities in several countries, such as China, India, Turkey, and Nigeria. These actions created uncertainty and fear among crypto investors and users, who faced the risk of losing access to their funds or facing legal consequences. The regulatory pressure also affected the operations and growth of crypto companies and projects, who had to comply with stricter rules or relocate to more friendly jurisdictions.
These scandals and events, along with other factors such as market manipulation, investor sentiment, and technical analysis, contributed to the crypto bear market that lasted from November 2021 to May 2022, during which the total market capitalization of crypto assets dropped by more than 70%, and the price of $BTC fell from close to $69,000 to below $20,000.
