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2022 has been a bad year for crypto. And the last few days have been disastrous.
There are a bunch of reasons for this — some general sentiment-related, some crypto regulations-related, and some specific cryptos-related.
1. The world is in a gloomy mood.
Dozens of mainland Chinese cities, including Shanghai, are in covid-related lockdowns, and this is negatively affecting companies around the world. The Russia-Ukraine war is also costing the world billions.
2. Governments around the world are getting harsher towards crypto.
Over 40 countries, including China, have either outright banned crypto or have cut off banking access to the ecosystem, or prohibited cryptocurrency exchanges.
3. The Indian government has taken a very harsh stand against crypto.
It has imposed a flat 30% income tax on crypto profits while disallowing any exemptions due to crypto losses. A 1% TDS is coming into force from 1 July, and a goods and services tax of 18% or more is also expected. Despite the taxes, the government has made it clear that crypto has not been legally recognized. This has had a huge negative impact on the Indian crypto ecosystem.
4. The El Salvador experiment seems to have failed.
The first country to make Bitcoin legal tender has been unable to get its citizens to use it. And their Bitcoin Bond met with zero interest.
5. There have been many crypto exploits and scams in 2022.
Examples — Ronin exploit ($615 million), Solana Wormhole exploit ($326 million), Beanstalk flash loan attack ($181 million), and the Qubit exploit ($80 million). These exploits and scams bleed investors and severely impact sentiment.
6. The Ethereum “merge” keeps getting delayed.
This is expected to make Ethereum faster and cheaper. But no one knows when, or if, it will ever come.
7. The hype around NFTs seems to be dying out.
This is due to many plagiarized works, fake collections, spam, frauds, rug-pulls, and wash trading.
8. Terra (LUNA) has crashed and burned spectacularly!
First, its algorithmic stablecoin TerraUSD (UST) lost its peg and crashed miserably. Then Binance suspended trading in UST and LUNA. Things went downhill after that.
9. Terraform Labs sold all its Bitcoin for $1.3 billion.
Terraform Labs is the organization behind UST, LUNA, and Luna Foundation Guard. This selling pressure has also dragged the entire crypto market down.
10. The hype around metaverse seems to have taken a dent.
Yuga Labs, the project behind Bored Ape Yacht Club NFTs, had announced the sale of land NFTs of its Otherside Metaverse. This had pumped the prices of ApeCoin. But the land NFT sale happened at a flat rate of 305 ApeCoin tokens per plot instead of an auction-style sale. This led to a collapse in ApeCoin prices.
10 reasons for the Crypto Crash was originally published in Blockchain Blog on Medium, where people are continuing the conversation by highlighting and responding to this story.