While it turned out to be a year of recovery for cryptocurrency prices, and perhaps there was less bad news compared to 2022, the world of cryptocurrency is never devoid of its fair share of drama. If you weren’t glued to Crypto Twitter all year like we were, here are some of the highlights.
DCG Tragedy
When the Winklevoss twins launched Earn to give customers an 8% return on borrowed cryptocurrency, they turned to Genesis, a subsidiary of Digital Currency Group. But when Genesis went bankrupt, it left Earn customers in a tough spot. The twins’ cryptocurrency exchange, Gemini, became embroiled in a dispute with Digital Currency Group CEO Barry Silbert. Through a series of open letters, Cameron and Tyler accused Silbert of egregious behavior and claimed that Genesis owed Gemini over a billion dollars. In September, DCG’s lawyers proposed a new bankruptcy plan that would provide Earn customers with between 95% and 110% of what they were owed after Genesis’s bankruptcy announcement. In October, New York Attorney General Letitia James filed a lawsuit against Gemini and DCG for defrauding investors.
Bank Collapse
In March, Silicon Valley Bank became one of the largest federally insured financial institutions in the U.S. to fail since 2008, a failure that led to instability and contagion in the sector. Five other banks collapsed, including Silvergate Bank, a cryptocurrency deposit bank that served a growing number of high-profile clients like Coinbase and FTX. With most deposits tied to the sector, when cryptocurrency prices fell and FTX collapsed, Silvergate was shut down due to a bank deposit flight. Days later, Signature Bank, another cryptocurrency deposit bank, was closed by New York state regulators. Other institutions like First Republic Bank and Citizens Bank also collapsed in 2023.
Do Kwon
After months on the run following the collapse of the $40 billion algorithmic stablecoin TerraUSD, former Terraform Labs CEO Do Kwon was arrested in March along with the company’s former CFO. The 32-year-old entrepreneur, who had spoken disparagingly about “the poor” on platform X/Twitter, was attempting to flee Montenegro to Dubai and was found with several fake passports. He declared himself not guilty of charges of using false travel documents. Later, a higher court reversed a proposed bail ruling of €400,000 (about $435,000 at the time) that left Kwon in jail. In June, he was sentenced to four months in prison and remained in custody while Montenegro’s top justice official reviewed extradition requests from the U.S. and South Korea for Kwon. Kwon appealed a Montenegrin court decision allowing for his extradition, but the Wall Street Journal reported that Kwon is likely to be extradited to the United States.
Decline of NFTs – Even with Ordinals Emergence
NFTs were among the biggest winners in the previous booming market that pushed cryptocurrency prices to record levels. This year told a different story. By the third quarter, NFT trading volume fell to $1.39 billion, compared to over $12 billion in the first quarter of 2022, according to data from DappRadar. In January, a new type of NFT on the Bitcoin network called Ordinals created a trading frenzy. Over 49 million have been created since then, according to Dune. A number of new players, including the crypto marketplace Blur, transformed the NFT business model by introducing incentives and lowering fees to challenge the former leader OpenSea. To compete, OpenSea stopped enforcing creator royalties, which led to significant backlash from NFT artists. By November, Blur and its competitor OKX accounted for more than two-thirds of NFT trading activity, while OpenSea held around 10% – even though it still had the highest number of active traders. In November, OpenSea laid off half of its employees – then held an all-hands meeting at a palace.
Ease
Accessibility and Ease of Loss
This year, billions of dollars have flowed into digital assets, but on the other hand, many former industry leaders have collapsed. In November, Fortune reported that Wormhole raised $225 million in the largest cryptocurrency-related funding round of the year, from investors like Arrington Capital and Jump Crypto. All investors received token certificates instead of equity in the company. The funding round, which was considered the first even though it had been nurtured by Jump Crypto for years, valued Wormhole at $2.5 billion. (Worldcoin, a blockchain technology company based on identity verification through web scanning, also mentioned was founded at a value of $115 million in May.) On the other hand, approximately $1.7 billion was stolen from cryptocurrency projects this year, which is a significant amount but less than estimates suggesting that hackers took $4 billion last year, according to TRM Labs. Some of the largest hacks involved exploitation of nearly $100 million each from the affected Multichain cross-chain bridge, Euler Finance lending application, and cryptocurrency exchange Poloniex.
Legal Victories
After years of legal battles with the Securities and Exchange Commission, Ripple and Grayscale achieved victories against the regulatory body this summer. In July, a federal judge ruled that the XRP token closely associated with Ripple is not a security when sold on the open market through cryptocurrency exchanges. The judge also gave the regulatory body a partial victory when she ruled that Ripple’s institutional sales constitute unregistered securities offerings, but many experts and a lot of Crypto Twitter users hailed the outcome as a general win for the broader industry. A federal judge ruled in October that the regulatory body could not appeal the decision, and the agency later dropped the charges against the company’s managers. Grayscale also received a boost after a federal court stated that the regulatory body was “arbitrary and capricious” in not granting the company a license to create a spot Bitcoin ETF, opening the door for potential approval of similar financial instruments next year. The presiding judge noted the regulatory body’s approval of Bitcoin futures-based ETFs as evidence of the agency’s inconsistency. The regulatory body chose not to appeal the decision.
SBF
In November, Sam Bankman-Fried, the former white knight of cryptocurrency, was convicted of seven charges related to the collapse of the cryptocurrency exchange FTX and the other research firm Alameda Research. At its peak, FTX was valued at about $32 billion, but as revealed during his trial that lasted over a month, SBF and his senior management team (many of whom testified against him) allocated billions of dollars in customer assets to fund risky deals at Alameda and purchase luxury real estate, among other things. SBF, whose trial is scheduled for March, awaits a second trial to determine whether he used customer funds to attempt to bribe Chinese government officials.
CZ and Binance
For over a year, Binance, the largest cryptocurrency exchange in the world, and its founder Changpeng “CZ” Zhao, have been under scrutiny from regulators and law enforcement in the United States. In November, the company reached an agreement with the Justice Department and two other federal agencies in which it agreed to pay a fine of $4.3 billion and plead guilty to violating U.S. money laundering laws and economic sanctions. Zhao resigned from his position as CEO and also admitted to money laundering charges. He will have to remain in the United States until the court session. In a separate agreement with prosecutors, the former CEO of Binance agreed to pay a fine of $50 million. The former compliance officer of the company agreed to pay a fine of $1.5 million. As part of the Binance agreement, the company will have to accommodate court-appointed monitors overseeing the business and determining whether it complies with U.S. laws.
Funds
The Big Bitcoin
There are already spot Bitcoin ETFs in Europe and Canada, but over the past several years, the U.S. Securities and Exchange Commission has remained steadfast in not approving a spot Bitcoin ETF, citing the potential for market manipulation as a reason for rejecting numerous applications. (Cameron and Tyler Winklevoss, from the famous Social Network, tried for the first time in 2013.) However, over the past several months, momentum has started to shift against the regulatory body as more traditional companies have submitted their own applications. While Grayscale, which manages the world’s largest Bitcoin trust, has been battling the regulator in court to push for GBTC’s conversion to a spot Bitcoin ETF, companies like BlackRock and Fidelity have submitted their own applications. After Grayscale’s court victory over the regulator, some analysts expect the first spot Bitcoin ETFs to be approved as early as January, which could inject hundreds of billions of dollars in flows into the cryptocurrency market.
Is the Crypto Winter Over?
Bitcoin started the year at over $16,000. As 2023 comes to a close, the most famous cryptocurrency has risen 157% so far, trading at its highest level in 20 months. Beginning in mid-October, Bitcoin surged from the $26,000 range, where it had been accumulating for several months, and broke the $40,000 level in December before some sell-offs. (It is still some distance from its all-time high of around $69,000 in the fall of 2021.) Among the events that propelled Bitcoin’s rise in recent months was the election of a pro-crypto president in Argentina, legal victories against the regulator by Grayscale and Ripple, and crypto-friendly comments from BlackRock CEO Larry Fink. However, the most important reason for the recent rise in Bitcoin is investor speculation that the regulator may soon approve a large number of spot Bitcoin ETFs.
This story was originally published on Fortune.com
Source: https://www.aol.com/biggest-crypto-stories-2023-113000645.html
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