FTX, Terra Luna, Regulation Issues and Other Crypto Scandals: What Lessons Can the Year 2022 Can Give Us About Crypto, And How to Learn From Past Mistakes

FTX, Terra LUNA: Decrypting the Year 2022 for Crypto

We will remember the year 2022 as a turning point for the crypto ecosystem. Many things have been happening, ranging from hacks and massive thefts to crises, such as the fall of Luna Terra. Finally, the bankruptcy of FTX, the second-largest crypto exchange, got us thinking that the crypto world needs some changes.

Crypto still offers numerous opportunities to make money if you use failsafe techniques such as the DCA Multiplier or staking your crypto in pools. However, it is hard to ignore what happened during the past year and its many consequences for crypto and web3 worldwide.

Things need to change in regulation and transparency. We will see if the year 2023 will experience a dramatic change in how we invest in digital products such as crypto-currencies and NFTs.

Terra Luna and FTX: What to Learn About These Scandals

In June 2022, the Terra Luna ecosystem was the victim of a spectacular crash where many people worldwide lost their life savings. The TerraUST, a stablecoin based on the dollar, crashed as well and never recovered.

For many, the only culprit was Do Kwon, the founder of Terra Foundation. Do Kwan was a software developer behind the Terra Luna project for many years. It is said that the man became greedy and failed to supply liquidities for the enormous amount of money invested. He faces many years in prison for fraud.

We finished the year with perhaps the most significant fraud case that the crypto world has ever seen. In November 2022, the FTX platform was considered the second most important exchange for crypto-currencies. It was capitalized at around 32 billion dollars before it went bankrupt, and its founder, Sam Bankman-Fried, was indicted for fraud.

Indeed, investors in FTX didn’t have a clear overview of what their funds were going to be used for, and it seemed like they were used to pay back investors for another company, which was completely illegal. The crypto community is still recovering from the aftermath of the FTX scandal, and many questions are left unanswered. Bankman-Fried risks 115 years of prison.

The Fall of Cryptocurrencies Will Benefit Traditional Banking

These issues push crypto investors to return to the traditional investing sector. Trade-Republic, a traditional exchange based in Germany, has seen a surge in new clients these past few months, and they are mainly interested in products such as ETFs and Tech companies’ shares.

The company noticed that nearly half of these new clients didn’t have previous knowledge of traditional investing before. This company, amongst many others, is set to gain new customers in 2023, and a large portion of it will be people who lost money in crypto investment.

Regulation and Transparency Are the Future of The Blockchain

Crypto can only thrive if big web3 companies such as Binance can persuade the general public that investing in crypto is generally safe. While the crypto ecosystem is still relatively new, it needs more transparency.

For example, FTX’s headquarters is located in the Bahamas, which keeps it from the scrutiny of American authorities. This needs to change so that companies like this have more transparency and their customers have more guarantee on what they’re buying.

Let’s try to learn something from the recent crisis, just as people did after the Madoff scam in 2008. The fall of FTX is spectacular, and there will certainly be an important aftermath, but it will help investors and regulators better understand crypto products.

Customers need to understand better what they are buying and how their funds are being used. With more regulation from local governments and financial authorities, digital currencies like bitcoin and Ethereum will continue to grow. They will strongly impact people’s lives in the next ten years.

It is still challenging to handle regulation, as the crypto ecosystem is still in its infancy. Some say it’s still a bit like the Wild West regarding regulation, even if regulatory organizations such as the SEC have worked for years to comprehend crypto-investment better.

According to Changpeng Zhao, owner of Binance, prominent crypto actors must join forces with national regulators to give more guarantees to customers of what happens with funds they deposit.

It needs to be done, so scandals like FTX don’t happen again in the future. Remember, crypto investment isn’t even a decade old, and it will take time for this market to be regulated and prevent people from losing major amounts of money.