November 2022 delivered a sucker punch to the crypto world, one so devastating that even the most battle-tested veterans found themselves asking: was there anything left worth believing in? FTX, the industry's rock-solid number two, the white knight that had been bailing out failing projects just days before, imploded in 48 hours. It was surreal: Sam Bankman-Fried, the $16 billion wunderkind, turned out to be nothing more than a common fraud who'd blown $8 billion of his customers' money.
And the most cynical part? Just a week before the collapse, this disheveled genius in his perpetually wrinkled t-shirt was giving interviews about proper risk management. He was lecturing on financial responsibility while his own empire teetered on the edge, held up only by investor trust and billions in stolen customer funds.
The third cycle couldn't have ended any other way, only with a Shakespearean tragedy. One tweet from CZ set off the avalanche: "Liquidating all our FTT." Sam responded with the classic line of doomed financiers: "We're fine." The same words they uttered at Lehman Brothers the day before it collapsed.
A digital bank run doesn't look as epic as crowds storming bank doors, but the pain is the same. Millions lost their money. Some lost everything they'd saved for years. From icon to handcuffs: 32 days. Too much easy money, too little accountability, too much faith in one's own genius.
But I'm getting ahead of myself. The story of this collapse began long before November 2022. Let's go back to December 2018, when Bitcoin lay at the bottom of an ocean of despair at $3,150. Even the incorrigible optimists had given up. It was there, at the point of maximum hopelessness, that the third four-year cycle was born.
Buy the bottom, get a second for free. The end of 2018 became the perfect illustration of this principle. All autumn the market had been treading water around $6,000, and even the most cautious began to believe: this was it, the bottom. Three months of stability in crypto is almost an eternity. "It definitely can't go lower," crypto X/Twitter commentators assured each other as they opened long positions.
The market waited just long enough for the maximum number of people to buy into this illusion of stability. Then it crashed another 50% to $3,150. It was the complete annihilation of hope. After that, only a handful kept the faith and continued accumulating Bitcoin. Everyone else either left the market or started preaching about Bitcoin's imminent fall to $1,000, then to zero. And while the price drop was survivable, the mass exodus from the industry hit hardest. Crypto chats emptied out. YouTubers switched to other topics. Conferences were canceled one after another. The media forgot the word "Bitcoin." The sensation had fizzled out.
Yesterday's market conquerors sheepishly returned to the offices they'd left with such fanfare a year earlier. Bosses greeted them with knowing smiles and the obligatory "I told you so." Crypto chats turned into support groups for anonymous losers, complete with gallows humor about McDonald's internships and cardboard box living arrangements. Skeptics buried Bitcoin for the 324th time, and for the first time, almost no one came to its defense. Even the maximalists had run out of energy to argue.
For four long months, Bitcoin lay comatose at $3,150. Time stood still. Days blurred into a monotonous gray mass without news, movement, or hope. Checking your portfolio became daily torture: red numbers, quick app closure, crushing despair. Many capitulated completely: deleting crypto apps, forgetting exchange passwords, erasing loss amounts from memory. The rest just waited for... something. Maybe a miracle. Maybe the final crash.
Crypto winter triggered natural selection. First to disappear were the speculators and get-rich-quick hunters. Next vanished the influencers: without hype and price growth, their audience evaporated. Only three types survived in the industry: ideological maximalists, hostages to their own 95% losses, and builders.
It was the builders who transformed crypto winter into a golden age of construction. While prices scraped bottom and media attention shifted elsewhere, future giants were being forged in labs and coworking spaces. Uniswap was perfecting automated market maker mechanics. Aave was inventing flash loans. The OpenSea team, crammed into a tiny San Francisco office, stubbornly believed in the future of digital art when it seemed absurd.
Back then, they were considered lunatics. "What DeFi? What NFTs? Bitcoin is dead." But crypto's history is written by exactly such lunatics. They were laying the foundation for the coming boom while everyone else was holding the industry's funeral. And it's always like this in crypto: while the majority mourns the past, the minority is already building the future.
March 2020 brought the first signs of a thaw. Bitcoin came alive and settled into the $7,000-10,000 range. The market exhaled, traders relaxed. And then the world went insane.
It all started with alarming reports from Wuhan. Then Italy locked down under strict quarantine. And on March 12, the entire financial world experienced "Black Thursday." The S&P 500 plunged 10%, marking its worst day since 1987. For traditional markets, this was a genuine nightmare. For crypto, it was just a warm-up.
The crypto apocalypse began the night of March 12-13. Bitcoin crashed from $7,900 to $3,800 in 24 hours, down 54% in a single day. Ethereum vaporized 60% of its market cap. Altcoins turned to digital ash.
Exchanges collapsed under the weight of panic. BitMEX, Coinbase, Binance: all the major platforms went offline one after another. Cascading long liquidations turned the drop into a global avalanche. The barely flickering hope of recovery was trampled. Crypto Twitter became a wall of despair: "Game over," "Dump everything," "Bitcoin to zero." Veterans who'd survived every previous crash stared at their screens in stunned silence.
The speed of the collapse was shocking: what had taken months in previous crises happened overnight. Panic gripped all markets. People only believed in tangible things: medicine, food, gasoline. Digital entries on a blockchain seemed absurd against the backdrop of empty shelves and job uncertainty. Traditional safe havens offered no protection: gold fell, bonds depreciated, real estate froze. Cash became the only refuge.
But crypto wouldn't be crypto if it didn't deliver a surprise. Just three days later, Bitcoin bounced back to $5,000. Within a week it returned to $6,000. By May it exceeded pre-crisis levels. Jerome Powell had simply turned on the money printer.
On March 23, 2020, the Fed announced economic rescue measures unprecedented in history. Unlimited bond purchases. Interest rates: zero. Volume of injections: trillions. Jerome Powell uttered the historic phrase "Whatever it takes," and markets understood: this wasn't a bluff. The central bank opened the floodgates, and a torrent of liquidity washed over all assets. "Money printer go brrr" memes took over the internet, perfectly capturing what was happening.
The next act of this monetary experiment was direct cash handouts to the population. The U.S. government started sending $1,200 checks to every citizen, followed by another $600, then $1,400 more. Millions of people held "free" money in their hands for the first time in their lives. Robinhood and Coinbase were overwhelmed by the influx of new users. A generation of zoomers, locked at home with free government money, discovered trading. And if stocks seemed boring, crypto promised real adrenaline. The math was impressive: those who invested their first stimulus check in Bitcoin saw it grow from $1,200 to $10,000 by the 2021 peak.
Infinite liquidity changed the rules of the game. Institutions scrambled to find shelter from looming inflation. Retail traders got free money to experiment with. Bitcoin underwent an incredible transformation: yesterday's toxic asset became the only defense against the Fed's printing press. By summer 2020, there was no doubt: the most powerful bull market in crypto history had begun.
Even with the Fed's money flooding in, Bitcoin hit a wall. For two months straight, traders woke up to the same number: $9,400. The king of crypto was stuck, unable to punch through resistance, leaving the entire market in limbo. No room to fall, but no juice to climb either.
While crypto communities were already joking that Bitcoin had turned into a stablecoin, a new breed of shiny decentralized finance (DeFi) protocols took center stage. They would become the catalyst for explosive growth in late 2020.
DeFi protocols unlocked entirely new ways to interact with crypto and, consequently, new income streams. Aave became the flagship of the lending revolution: deposit your ETH, get stablecoins, but keep your upside exposure. The real magic came next. Use those stablecoins to buy more ETH, then deposit it again as collateral. This loop could repeat multiple times, amplifying potential profits.
Aave wasn't just a goldmine for bulls. Bears got a simple, convenient way to short tokens on-chain without using centralized exchanges. The mechanics were straightforward: borrow ETH or another token on the platform, sell it, wait for the price to drop, buy back cheaper, return the loan, and pocket the profit. Sure, it took more clicks than a regular exchange short. But no KYC, no account freezes, no risk of the exchange getting hacked. Pure decentralization.
The second titan of the DeFi revolution was Uniswap. Where once you needed a centralized exchange with KYC, order books, and listings to actively trade tokens, now all you needed was to connect a wallet. No registration, no restrictions. Pure smart contract magic. And while various DEX exchanges had existed before, Uniswap's genius simplicity, user-friendliness, and minimalist design made it the first mass-market DEX protocol. It was DeFi's Google moment: a clean page with one function that worked flawlessly.
The simple interface concealed revolutionary technology. Automated market makers replaced traditional order books. Prices were determined by the mathematical formula x*y=k based on token ratios in the pool. Swaps happened instantly, no waiting for a counterparty. But the real game-changer: any user could create a pool for their token, become a liquidity provider, and earn fees. Uniswap embodied the idea of a people's exchange: no owners, no middlemen, no permissions needed. Just an ETH-compatible wallet.
Uniswap also solved a problem that had plagued Ethereum for years: the graveyard of dead tokens. Before, a project without a Binance or Coinbase listing was doomed. Teams paid hundreds of thousands for listings and gave away millions of tokens to market makers. Most still got left behind. With Uniswap, projects had an alternative. Just create a pool, add liquidity, and automatic trading could begin. No negotiations, no listing fees, no waiting. For the first time, centralized exchanges felt fear: Uniswap's volumes grew exponentially, reaching billions within months.
On September 16, 2020, Uniswap threw a party that rightfully went down in crypto history. The team launched the UNI token and simply gifted 400 UNI to every user who'd ever used the protocol before September 1. At the launch price of $3, that meant $1,200 out of thin air. The generosity was off the charts: even failed transactions counted. Tried to swap, got an error, left frustrated? Here's your 400 UNI anyway.
Crypto Twitter turned into a stream of euphoria and screenshots. Everyone rushed to check their addresses: main ones, test ones, forgotten ones. The claim page kept crashing from the traffic surge. Many who'd used multiple addresses for trading on Uniswap through necessity or happy accident received gifts worth tens of thousands of dollars. It was a true celebration for the crypto community, for the most forward-thinking part that had been testing DeFi's new possibilities. History had never seen such generosity: a project thanked every early user, creating thousands of happy stories in a single day.
Then came madness. Within days, UNI soared from $3 to $8, hit $15 a week later, and reached $45 by May 2021. Those 400 gift tokens turned into $18,000, but only for those with the discipline not to sell. They were the minority. Most dumped their tokens in the first hours, happy with their "free" $1,200, never suspecting they were selling a first-class ticket on a rocket ship.
UNI's airdrop success sparked a new gold rush. Now every DeFi protocol hinted at a future token, every testnet promised rewards. A new profession was born: the airdrop hunter. These people turned hunting drops into a science: hundreds of addresses, spreadsheets tracking protocols, daily transactions across every new project. They burned thousands on transaction fees hoping for future drops. And they often won: Gitcoin gifted $2,000, ENS handed out over $6,000, dYdX showered traders with five-figure sums. The golden age of DeFi generosity was in full swing.
But behind the celebration lurked problems. Impermanent loss was killing yields for Uniswap liquidity providers1. When tokens in a pool rose, providers lost potential profits, and fees didn't cover the opportunity cost. Many only discovered this when withdrawing liquidity and realizing they would have made more by simply holding the tokens in their wallet.
Meanwhile, scams and fraudulent schemes grew exponentially. Honeypot tokens trapped victims with one-way trading: you could buy but couldn't sell. Fake versions of popular tokens harvested the careless. But the king of fraud was the rug pull. Scammers created attractive pools with scam tokens and lured unwary traders with artificial price pumps. Then they'd drain all the ETH from the pool, leaving buyers with worthless tokens. The DeFi jungle devoured the careless daily.
While DeFi protocols were rewriting the rules of finance, an even stranger revolution was brewing in the shadows. NFTs, or non-fungible tokens, had existed since 2017, but everyone dismissed them as a cute toy with no future. CryptoPunks, the very first collection of 10,000 pixel punks, was so unwanted that the creators at Larva Labs minted them themselves just to test if the contract worked.
Larva Labs took a revolutionary step: they encoded all 10,000 images directly on the blockchain. No external servers, no risk of loss. The punks became eternal. But the market didn't appreciate the innovation. For two and a half years, the collection gathered dust in obscurity. The free giveaway flopped. Punks sold for a couple dollars, and even at that price, buyers were rare. Enthusiasts grabbed them out of curiosity, not believing in future value. Then came DeFi summer, and with it, an awakening interest in digital art. Perhaps crypto millionaires from DeFi were looking for somewhere to spend their profits.
By the end of 2020, the CryptoPunk floor price had soared to several thousand dollars. By spring 2021, rare specimens were selling for hundreds of thousands. Punks became such a cultural phenomenon that even during crypto winter's worst days, the floor price rarely dipped below 40 ETH. The euphoria peaked in summer 2021: CryptoPunk #7523 ("Covid Alien") sold at Sotheby's auction for $11.7 million. A success story that defied traditional logic: a 24x24 pixel image cost as much as a Beverly Hills mansion. Only in crypto could such miracles happen.
CryptoPunks opened Pandora's box of blockchain JPEGs. Bored Ape Yacht Club launched in April 2021 at a mint price of 0.08 ETH, roughly $200 at the time. The collection of 10,000 bored apes captured the public's imagination. But BAYC offered more than just pictures. It was a ticket to an elite community: private chats, parties in Miami and New York, access to future drops. An ape avatar became the new Rolex, a sign of belonging to the crypto elite.
But BAYC's creators weren't just selling pictures. They were building an empire. Holders received gift after gift: first free Mutant Apes (floor price shot up to 20 ETH), then Bored Ape Kennel Club dogs, and in March 2022, an APE token airdrop. Each airdrop brought tens of thousands of dollars. Early buyers became millionaires just by holding a JPEG of an ape.
The NFT boom reached its zenith, but this success had a dark side. Ethereum was literally choking to death on its own popularity. On peak days, a simple transaction cost $150, buying an NFT ran $500, and a complex DeFi swap hit $1000+. Ethereum had become a blockchain for the rich. Small players couldn't even afford to withdraw tokens from a Uniswap pool. Technology created to democratize finance had itself become an elite club.
Binance Smart Chain (BSC) burst onto the scene at the perfect moment. CZ had launched the network back in 2019, but its moment in the spotlight came in summer 2020. No grandiose claims about being an "Ethereum killer," just a simple promise: the same functionality for pennies. A blockchain for the people while Ethereum served millionaires.
The BSC team didn't reinvent the wheel. They took Ethereum's code, added centralization, and sped up the blocks. Result: transactions for $0.10 instead of $100. DeFi protocols migrated in droves. PancakeSwap shamelessly copied Uniswap, Venus cloned Compound. The community didn't mind; everyone was too busy farming cheap tokens and four-digit APYs.
BSC took off like a rocket. TVL, total value locked, reached tens of billions within months. Yield farmers migrated in hordes: why pay $300 to harvest from liquidity pools on Ethereum when BSC cost $0.30 and offered even higher yields? Purists screamed about centralization, about 21 validators controlling the entire network. But DeFi degens were making thousands of percent annually and couldn't care less about the nuances of decentralization.
But the real dark horse was Solana. Anatoly Yakovenko and his team had been quietly building the blockchain since 2017. They launched mainnet at the height of COVID panic in March 2020, the perfect time to go unnoticed. Then in September, the SOL token hit exchanges, and the world saw something incredible.
Private round investors got SOL at $0.04 per token. The first buyers on the open market paid $0.50, instantly handing early investors 1,150% profits right out of the gate. But that was just the beginning. May 2021: SOL broke $50. September: $150. November: $260. Every thousand dollars invested in the seed round turned into $6.5 million. Those who bought at the public sale for fifty cents and resisted the temptation to sell early turned $1,000 into $520,000. Success stories that made the uninvolved weep with regret.
Solana promised the impossible: a theoretical 65,000 transactions per second versus Ethereum's 15. Fees of $0.00025 versus $50-150, plus full smart contract functionality. "Ethereum on steroids," the community joked. And unlike many crypto promises, these actually came true. Almost. The network crashed with enviable regularity. "Turn it off and on again" became Solana's meme. But when it worked, Solana was Formula 1 among bicycles.
Solana's success unexpectedly reanimated the dying topic of mining. Individual Bitcoin mining had been dying since the second cycle and was completely crushed in the third. Bitcoin was captured by industrial giants with airport-sized farms plugged directly into hydroelectric or even nuclear power plants. Ethereum miners were also preparing to exit the business ahead of the network's transition to Proof of Stake, which required ETH in wallets, not GPU farms.
Solana offered a third path. Proof of History (PoH) required powerful hardware, but not an army of ASICs. A Solana validator was a single powerful server with a top-tier processor, a terabyte of RAM, and NVMe drives. The price tag stung: $5,000-10,000 for hardware and $1,500-3,000 monthly for hosting with gigabit connectivity. But these were costs accessible to enthusiasts, not just corporations. Hundreds of geeks worldwide launched nodes, hoping to repeat the success of early Bitcoin miners.
Once again, history repeated itself: those who risked supporting the project received rewards they never dared dream of. Early Solana validators who spent a few thousand on a server woke up millionaires. Testers received six-figure sums for a couple of bug reports. GitHub contributors got rich from a few lines of code. The crypto community learned a new lesson: be first, take risks, participate. The testnet hunt began: thousands of fortune seekers launched nodes for every new blockchain, hoping to catch the next Solana.
But while enthusiasts hunted for the next Solana, a different revolution was brewing in Wall Street's corporate offices. On August 11, 2020, the unthinkable happened. A public company listed on NASDAQ bought Bitcoin. Not some crypto startup, but MicroStrategy, a boring business analytics corporation with a 30-year history. 21,454 BTC for $250 million. This was the moment Bitcoin transformed from an anarchist's toy into a corporate asset.
Michael Saylor, MicroStrategy's CEO, went from hater to maximalist in record time. Back in 2013, he tweeted that Bitcoin was destined to become an online casino. But the pandemic, the Fed's money printer, and Saifedean Ammous's book "The Bitcoin Standard"2 forced him to reconsider. Saylor read about hard money, fiat inflation, and realized: his billions were melting away. He needed protection. And he found it in that very same "online casino."
Saifedean Ammous proved to be a true visionary with "The Bitcoin Standard," a book that became gospel for the crypto community and inspired countless believers to hold BTC forever. Essential reading for anyone serious about investing in this market.
Meanwhile, MicroStrategy adopted an extremely audacious Bitcoin accumulation strategy. First, the company spent all its free cash buying Bitcoin. Then it took out a loan at 0.75% annual interest and bought Bitcoin. It issued $650 million in convertible bonds and bought more Bitcoin. It conducted a secondary stock offering and bought Bitcoin again. Every financial instrument became a way to stack more BTC.
Saylor essentially hacked the system, transforming a boring enterprise analytics vendor into a Bitcoin ETF before real ETFs existed. MSTR stock became a way for institutions to get Bitcoin exposure. Saylor himself became a crypto evangelist. Hundreds of interviews, podcasts, Twitter threads. His trademark sighs before answering "Why Bitcoin?" became a meme. Critics called him insane. But when Bitcoin showed a six-fold increase from $11,654, where Saylor made his first purchase, the madman became a prophet to the entire financial world.
Others followed MicroStrategy's lead. Tesla invested $1.5 billion in Bitcoin in February 2021. And Musk added laser eyes to his Twitter profile, the symbol of Bitcoin maximalism. Jack Dorsey's Square bought $220 million worth of Bitcoin. Even conservative insurance companies, family offices, and pension funds began allocating 1-5% to digital gold.
Institutional investors had come to Bitcoin before. But it was only in the third cycle that institutional FOMO truly exploded. Bitcoin was everywhere: CNBC ran Bitcoin charts 24/7. Bloomberg added crypto to its terminals. The question was no longer Bitcoin's legitimacy, only the size of one's crypto position. Risk managers who'd spent their lives minimizing volatility suddenly feared being left without a position in an asset that could 100x.
But the boldest move, one that Bitcoin maximalists had been predicting since way back in 2009, came not from a corporation but from a small Latin American country. In June 2021, at the Bitcoin 2021 conference in Miami, El Salvador's President Nayib Bukele delivered a video address that sent even the most ardent optimists into raptures. El Salvador became the first country to adopt Bitcoin as legal tender.
Nayib Bukele, the youngest president in Latin American history, masterfully wielded the power of symbols. His country of 6.5 million people with a GDP smaller than an average American city suddenly found itself at the center of global attention. Being first matters in crypto, and Bukele understood this perfectly. The pace was impressive: June 9, the law passed parliament; September 7, Bitcoin became official currency. Just 90 days from idea to implementation.
Bukele didn't stop at symbolic gestures and went all-in. El Salvador began buying Bitcoin for its national treasury, and each purchase became a Twitter show: memes, rockets, laser eyes. "Bought the dip 🚀" became the president's signature phrase. By the end of 2022, the country had accumulated over 2,300 bitcoins. The IMF threatened, S&P downgraded ratings, economists wrote scathing articles. The entire traditional financial world turned against little El Salvador. But Bukele held his line, calling the country a "beacon of freedom" in a world of fiat currencies.
The experiment that most called madness turned into triumph. El Salvador started buying at $40,000-50,000, continued through the drop to $16,000. Classic DCA strategy on a national scale. Daily purchases, regardless of price. The entire traditional finance world laughed at El Salvador and President Bukele with each Bitcoin drop. But the mockery abruptly stopped when Bitcoin reversed course and the country found itself up hundreds of millions of dollars3.
But the effect of Bitcoin legalization went far beyond finance. Tourism soared 30%: crypto millionaires flew in to see the "Bitcoin country"4. Hotels in El Zonte are packed year-round. Restaurants and shops accept Lightning payments, faster and cheaper than Visa. A new business class emerged: Bitcoin tours, crypto retreats, blockchain conferences. El Salvador became an experimental country attracting innovators from around the world.
But the symbolic effect proved no less important than the economic one. A small country challenged the IMF, Wall Street, and the entire traditional financial system. And won. Bukele became a true hero in the crypto community. The country proved: Bitcoin isn't just a speculative asset or corporate treasury. It can be real money at the national level.
The third cycle died differently than its predecessors. No spectacular peak followed by collapse. Instead, a treacherous double top. In April 2021, Bitcoin reached $64,000, then corrected sharply to $29,000. And just when everyone believed a new crypto winter had begun, Bitcoin bounced and resumed its rapid climb, reaching a new all-time high of $69,000 in November. This immediately filled everyone with false hope: "This is just the beginning, $100k within a month." Crypto Twitter was drunk on optimism. The market had set the perfect trap, and it worked.
The descent began imperceptibly. December, January, February: Bitcoin slowly slid downward. "Healthy correction," holders reassured themselves. "Institutions are accumulating," influencers echoed, greeting every bounce as the start of a new rally. But in May 2022, the market took a hit from which it never recovered. The first domino fell, and an avalanche followed.
Terra and its algorithmic stablecoin UST seemed invulnerable. $60 billion market cap, top 5 among all cryptocurrencies. The algorithmic stablecoin UST had held its dollar peg for over a year. Anchor Protocol paid 20% annual yield on UST deposits, attracting billions. Do Kwon, Terra's creator, acted like crypto's rock star. He trolled critics on Twitter, calling them poor and promising UST would soon become the world's main stablecoin. His response to risk warnings was always the same: memes. Pride truly comes before the fall.
The mechanism by which UST maintained its dollar peg through arbitrage with LUNA was elegant and even revolutionary in its own way. If UST fell below a dollar, arbitrageurs would burn UST and receive $1 worth of LUNA, profiting from the difference. If UST was worth more than a dollar, you could burn LUNA and receive UST. A perfect self-regulating system built on pure mathematics without any backing.
On May 7, 2022, someone began massively selling UST. The peg wobbled. First $0.99, then $0.98, then $0.95. Arbitrageurs rushed to burn UST for LUNA, but LUNA supply grew faster than demand. The math broke, replaced by a death spiral. The more LUNA was printed, the lower the price fell. And the lower LUNA's price fell, the less it could support UST.
It was a total collapse. 72 hours was all it took to erase $40 billion. LUNA: from $80 to $0.0001. UST: a dollar turned into ten cents. Anchor Protocol with its "guaranteed" 20% annual yield evaporated along with millions of people's deposits. Suicides, lost savings, ruined lives. Do Kwon vanished from Twitter. From hero to the most hated person in crypto almost in an instant5.
But this was only the beginning. Terra's crash exposed an uncomfortable truth: the entire crypto ecosystem was interconnected by invisible threads of mutual debts, collateral, and derivatives. One protocol's collapse pulled down the rest.
The next domino to fall was Three Arrows Capital (3AC), a hedge fund considered one of crypto's most successful. $10 billion under management, a portfolio of blue-chip crypto, visionary founders. Su Zhu and Kyle Davies were crypto Twitter royalty. Their bullish predictions moved markets, portfolio companies soared on a single mention. 3AC invested in everything: DeFi, NFTs, alts, new blockchains. It was an all-in bet on the entire industry at once.
But behind the facade of success lurked a dangerous game. 3AC used massive leverage, borrowing from everyone: Genesis, BlockFi, Voyager, Celsius. And nobody knew 3AC was borrowing from everyone simultaneously. The fund had invested $560 million in LUNA alone. When LUNA crashed to zero, a multi-billion dollar hole opened in their balance sheet.
In June 2022, 3AC stopped answering creditors' calls. Margin calls were ignored, debts went unpaid. Su Zhu disappeared from Twitter, and the Singapore office emptied out. On June 27, the fund declared bankruptcy, leaving behind $3.5 billion in debts.
3AC's collapse hit the entire industry like a tsunami. Voyager Digital, which had loaned the fund $650 million, froze customer withdrawals. Celsius Network, already struggling with liquidity, finally collapsed. BlockFi barely survived thanks to an emergency loan from FTX. The irony: their savior FTX would itself be bankrupt within months.
Panic spread like a virus. Genesis Trading, with a hole of hundreds of millions, desperately searched for salvation. Babel Finance suspended operations. Even major market makers felt the impact and sharply cut limits. Trust between institutional players evaporated. Everyone started demanding 200% collateral, triple-checking counterparties, and reducing lending.
Crypto's 'Lehman moment,' as journalists dubbed it. The parallels were obvious: interconnectedness, leverage, chain reaction. But crypto managed to repeat traditional finance's mistakes on fast-forward. What took banks years, crypto funds accomplished in months. The speed and scale of the collective panic were impressive.
And so, dear reader, we've come full circle back to where our story began. By November 2022, the market had survived Terra's crash, 3AC's bankruptcy, and the agony of Celsius, Voyager, and BlockFi. Everyone thought the worst was behind them. Bitcoin had stabilized around $16,000, surviving projects were licking their wounds. FTX under Sam Bankman-Fried looked like an oasis of stability in a sea of chaos.
SBF, as the industry called him, had built a reputation as a savior. When BlockFi needed liquidity, FTX provided a loan. When Voyager sought a buyer, FTX made an offer. Sam appeared at every conference, gave interviews to congressmen, donated millions to political campaigns, and said all the right things about effective altruism, regulation, and consumer protection. The perfect image formed around Sam: a young genius who wanted to save the world. The media adored him, politicians hung on his every word, the crypto community saw him as their protector.
Behind the scenes lurked a completely different reality. FTX was using customer funds to cover losses at Alameda Research, Sam's trading arm. Even before the market collapse, doubts had crept into many minds. Alameda traded like a degenerate: massive positions, extremely risky leverage, and bets on everything. They didn't even use stop losses, which Caroline Ellison, Alameda's CEO and Sam's ex-girlfriend, dismissed with "Why would you even need those?"
When Terra Luna collapsed, Alameda lost $500 million. When 3AC went bankrupt, hundreds more millions went down the drain. But instead of acknowledging problems, Sam doubled down, using FTX customer deposits as his personal piggy bank, believing it was all temporary and he'd soon recoup all losses.
On November 2, CoinDesk published an exposé: Alameda's balance sheet consisted mostly of FTT, FTX's own token. A house of cards built on their own currency. CZ smelled blood and on November 6 fired off a tweet-bomb: "Liquidating our FTT is just post-exit risk management, learning from LUNA." Binance owned $500+ million worth of tokens. Caroline Ellison, Alameda's CEO, scrambled to offer $22 per token for the entire position.
Sam went into damage control mode. His frantic messages betrayed his desperation: private negotiations, appeals to industry solidarity, warnings about market harm. But each plea only confirmed what everyone suspected. The emperor had no clothes. Exchange customers rushed to withdraw funds. The digital bank run had begun.
Within 72 hours, SBF's empire turned to ash. Customers rushed to withdraw funds, but the money wasn't there. FTT crashed from $22 to $2. The attempted sale to Binance failed after an hour of due diligence. The hole in the balance sheet: $8 billion in customer funds. On November 11, FTX declared bankruptcy, freezing millions of users' assets.
History knows many financial collapses, but FTX's velocity was staggering. From the world's second-largest exchange to bankruptcy in three days. From industry icon to fugitive from justice in a month. On December 12, 2022, Sam was arrested in the Bahamas. He faced charges of fraud, money laundering, and misusing customer funds. Maximum possible sentence: 115 years6.
FTX put the final nail in the third cycle's coffin. Bitcoin fell to $15,500, completing its journey from $3,150 through the euphoria of $69,000 back to despair. Looking back now, the signs were everywhere. The impossible yields, the celebrity endorsements, the promise that this time was different. But when you're living through a bull market, skepticism feels like missing out. I learned that cycles don't just repeat in price, but in our very human nature. The same greed, fear, and willingness to believe in financial alchemy that drove every previous bubble. The only thing that changes is the story we tell ourselves about why this time is special.
The crypto winter of 2022 lasted nearly a year, bottoming out at $15,600. Thus ended Bitcoin's third four-year cycle. For many, myself included, these four years were a rollercoaster: from the despair of 2018's crypto winter through the euphoria of DeFi summer and the NFT boom to a new crash, even more painful than the last.
The scale of destruction surpassed all previous cycles. Terra, 3AC, Celsius, Voyager, FTX. Each name on this list represented billions in lost dollars. And these weren't just numbers, but real people's fates: lost savings, destroyed pensions, and broken lives. Crypto seemed to confirm skeptics' worst fears: it's a casino where only the scammers win.
But the history of cycles teaches another lesson. After every winter comes spring. After every crash, the industry resurrects and emerges stronger. Speculative projects and fraudulent schemes die first. Those who built real improvements for the industry survived, strengthened, and entered the new season through the front door.
Bitcoin, despite falling 76% from its peak, kept working. A new block every 10 minutes, not a single stop, not a single hack. Ethereum successfully transitioned to Proof of Stake, solving the energy consumption problem. DeFi protocols that weathered the storm became even more resilient to volatility and sudden panic. NFTs stopped being speculation and found real-world applications.
And while everyone mourned their losses, builders were already laying the foundation for the fourth cycle. Layer 2 protocols solved the scaling problem: Arbitrum, Optimism, Base showed Ethereum's future. RWA (Real World Assets) prepared to tokenize real estate, bonds, stocks, and bring trillions of traditional assets onto the blockchain. The merger of AI and blockchain loomed on the horizon. Decentralized computing, autonomous agents, a new economy. The seeds were planted. All that remained was to wait for spring.
The lessons of the third cycle were brutal but necessary. Don't trust centralized exchanges. Don't believe charismatic leaders. Don't chase impossible yields. Don't turn away from your mistakes; you've already paid for them, so extract every valuable lesson. And even if experience is the only thing that grew during this time, that's already a considerable victory. Eventually quantity transforms into quality, and the knowledge gained will surely bear fruit.
In crypto, as in life, everything is cyclical. Falls give way to rises, euphoria to panic, and winter to summer. And as long as human nature lives on with its fears and hopes, greed and faith, the cycles will continue. Which means new opportunities will keep appearing for all those ready to learn, adapt, and wait.
1 Impermanent loss — temporary loss experienced by liquidity providers due to price divergence of tokens in the pool compared to simply holding them. Uniswap Documentation
2 Saifedean Ammous, "The Bitcoin Standard: The Decentralized Alternative to Central Banking" (2018) Official website
3 El Salvador continues its Bitcoin accumulation strategy. Track current holdings
4 Minister of Tourism Morena Valdez reported a 30% increase in tourism following Bitcoin adoption. Cointelegraph, February 22, 2022
5 Detailed timeline and analysis of Terra ecosystem collapse can be found at Wikipedia: Collapse of Terra
6 Sam Bankman-Fried was sentenced to 25 years in prison on March 28, 2024. The maximum possible sentence was 115 years. DOJ Press Release