Crypto Winter Deepens as Major Exchanges and Funds Collapse
Remember when crypto was the future and anyone who questioned it just “didnt understand the technology”? How times change. The crypto winter that started in 2022 has proven to be far more brutal than most enthusiasts predicted, with major exchanges collapsing, funds imploding, and billions of dollars in customer assets simply… gone.
The FTX collapse was the most spectacular failure, but it was far from the only one. Reuters documented how the FTX collapse sent shockwaves through the entire crypto ecosystem, affecting everyone from retail investors to institutional players who thought they were dealing with a legitimate, regulated entity.
What made FTX particularly painful was how many “smart” people got fooled. This wasnt just random retail investors buying meme coins. Major venture capital firms, celebrity endorsers, even regulators seemed to think Sam Bankman-Fried and his exchange were the future of finance. Turns out the future of finance was… fraud? Allegedly, anyway, though the criminal charges suggest “allegedly” is doing a lot of work in that sentence.
But FTX was just one domino. The Wall Street Journal covered the collapse of crypto lender Celsius, which froze customer withdrawals before declaring bankruptcy – leaving billions in customer funds trapped. Three Arrows Capital, once one of the most prominent crypto hedge funds, imploded. Terra-Luna wiped out $40 billion seemingly overnight.
The pattern that emerged was depressingly familiar to anyone who studied previous financial bubbles. The fundamental principles of sound investing havent changed just because the asset class was new. Leverage, lack of transparency, interconnected counterparty risk, promises of impossibly high returns – all the classic ingredients for disaster were there if you knew where to look.
Will crypto recover? Maybe. The technology underlying blockchains hasnt changed, and there are legitimate use cases beyond speculation. But the industry has lost an enormous amount of credibility. And the people who lost their savings to collapsed exchanges arent getting that money back no matter what happens to Bitcoin prices.
Let this be a lesson about “too good to be true” returns. Again. Because apparently we have to learn this lesson every decade or so.
