Looking back at the 2022 Crypto Winter


The crypto market has experienced exponential growth since 2021 and has drawn the attention of many new investors. The main drivers of the growth were Bitcoin, stablecoins, DeFi, NFTs, Layer 2s (L2s), and the Metaverse. As a result, many folks are now experiencing their first crypto winter. This isn’t the first time the market has experienced a crypto winter, but what followed was different. A few people remember how ICOs (Initial Coin Offerings) boomed in 2017 and faced a reality check in 2018. The difference between back then and today is how everything now is much more interconnected. Many protocols moved to L2 solutions, users transferred funds between blockchains, debt started playing a much more significant role in the space, and what followed was new: stablecoins de-pegging, protocols losing liquidity, centralized providers going bankrupt, etc.

Authors: Valentin Kalinov, Jonas Surmann, Philipp Sandner, Christian Viehof

The crypto markets soared from late 2020 through 2021 partly because central banks were infusing unprecedented amounts of liquidity into the financial markets. With low-interest rates, credit was as cheap as it ever could be. As a result, the tech sector, as well as crypto, were hitting new all-time highs. However, when the markets realized that raising interest rates was inevitable because of high inflation, liquidity got pulled from the markets. The most speculative assets, like some tech stocks and Bitcoin were hit the hardest. Bitcoin started the year 2022 trading at around $46,000 and reached $18,000 in the spring. As altcoins followed Bitcoin’s price drop, we witnessed a domino of companies to unpayable debts followed by liquidations and bankruptcies.

Figure 1: Total Crypto Market Capitalization and Volume in USD (source: tradingview.com)

Figure 2 shows a similar situation for the DeFi market. Many traders using highly leveraged positions and volatile tokens as collateral were faced with a reality check. When market prices declined, funds and lenders became forced sellers because of margins calls. The crash of Terra created a chain reaction hitting the DeFi space particularly hard.

Figure 2: Total DeFi market capitalization in USD (source: tradingview.com)

DeFi vs CeFi

The credit crisis in crypto markets detailed the difference between Centralized Finance (CeFi) platforms like Celsius, and FTX and DeFi platforms like Aave. Retail investors were lured by the promises of high yields in CeFi platforms. Their money then got loaned out to crypto hedge funds, putting it in risky assets such as UST, GBTC, and stETH. After the collapse of Terra, CeFi could no longer return the money to the retail investors. These events painted the flaw with CeFi and many DeFi protocols. Large DeFi protocols such as Aave, however, have proven resilience to big market crashes. It became clear that large CeFi lenders failed to manage risk properly.

The crash of Terra

On the 5th of May, UST lost its peg to the US dollar. As a result, 95% of its value got wiped in a few days. Terra was forced to sell BTC from the treasury in an attempt to save the peg. The Luna Foundation sold all 42,530 of its BTC and pushed the BTC price to even lower levels, further dragging down the entire crypto market. The death spiral continued until both UST and LUNA became worthless. Fifty-nine billion dollars got evaporated in a few days. Terra’s meltdown marked the beginning of a domino effect in the crypto market.

Figure 3: TerraUSD stablecoin price chart (source: tradingview.com)

The fall of the stablecoin will leave a significant mark on the ecosystem and the justification of DeFi as an alternative to the existing financial markets. These events even drew the attention of regulators such as Treasury Secretary Janet Yellen:

“I wouldn’t characterize it at this scale as a real threat to financial stability, but they’re growing very rapidly and they present the same kind of risks that we have known for centuries in connection with bank runs.”

Figure 4: What followed after the terra collapse (source: cnbc.com)

Three Arrows Capital (3AC)

3AC was a crypto fund led by Zhu Su and Kyle Davies. At its peak, 3AC was worth $10B. The fall of the crypto hedge fund can be traced back to the collapse of Terra. 3AC told the Wall Street Journal it had invested $200 million in Luna. Combined with the overall market downturn 3AC had no chance of surviving. Lenders asked for some of their cash back, but the money got already wiped. 3AC was the largest shareholder of Grayscale Bitcoin Trust (GBTC), which also suffered a massive loss. Another victim of the fallout was the popular exchange Voyager. Voyager lent 3AC around $660 million and filed for bankruptcy following the 3AC default.


Celsius froze user withdrawals in June 2022 following the Terra collapse. Later it became clear that the lender had at least half a billion dollars invested in Anchor protocol, which was a subsidiary of Terra and was the main yield generator for the company. Anchor promised investors a stable 20% yield on staked Terra stablecoins, and Celsius was one of these investors. The company also put $400M+ into Lido’s staked ETH(stETH). At some point, depositors started asking for their money back, and stETH got illiquid to the point where the stETH peg was no longer equal to the ETH price. Celsius’s court filing later revealed a $1.3 billion hole in its balance sheet. On Jul 13, 2022, the crypto lender filed for Chapter 11 bankruptcy protection in the US.


The Singapore-based crypto lender suspended withdrawals in August 2022. Hodlnaut said the move was “due to recent market conditions.” The company also laid off 80% of its staff to conserve cash and filed for creditor protection in Singapore on August 16. The company has revealed a financial shortfall of $200 million due to a higher outstanding liability balance compared to realizable assets in crypto. As of today, the user withdraws, and deposits are frozen.

Situation in Europe — NURI / Bitpanda

Crypto companies in Europe suffered from the overall market crash as well. The crypto-native bank NURI from Germany or the Austrian crypto exchange Bitpanda were hit massively. Bitpanda laid off 270 employees, more than a quarter of its workforce in June and NURI even needed to file bankruptcy on August 9, after laying off 20% of its workforce in May 2022. Celcius played a significant role in the insolvency of NURI, since the crypto lender has been integrated as a third party to offer NURI customers services to earn interest on their Bitcoin, resulting in a situation in which Celsius has been the effective custodian of the funds of NURI customers. After Celcius had stopped withdrawals in June, NURI customers were affected immediately and could not access their Bitcoin funds managed by Celcius. NURI was looking for follow-up financing during that time which could not be achieved due to the mentioned events and led to the bankruptcy in the end.


On November 2, Coindesk published an article about FTX and Alameda Research, which raised concerns about Alameda’s use of FTT, the native token of the FTX network, as collateral on its balance sheet. This led to worries about the stability of FTX and Alameda. On November 6, Binance, a rival exchange, announced it would sell $530 million worth of FTT, causing the price of the token to drop and leading to a liquidity crunch at FTX. Binance then announced a non-binding agreement to purchase FTX, but the deal fell through. On November 11, FTX filed for bankruptcy, leading to a domino effect among other companies with ties to FTX. On December 13, SBF, the CEO of FTX, was arrested in the Bahamas and charged with wire fraud and conspiracy in the US.

Figure 5: FTX acquisitions and partnerships (source: Colin Wu on Twitter)

Are there any winners?

All of the mentioned use cases had one thing in common — the centralization of powers which has led to poor decision-making and the following collapses. Real DeFi protocols such as Uniswap, Aave, and Compound Finance have survived and continued working like clockwork during these challenging times. One key advantage of DeFi protocols is that they are built on blockchain technology, which allows them to be transparent and auditable. This means that users of DeFi protocols can easily verify the correctness of the underlying code and the behavior of the protocols, which helps to build trust and confidence in the system. In contrast, centralized systems are often opaque and difficult to audit, which can make them more susceptible to fraud or mismanagement.

Overall, DeFi protocols have the potential to offer a more resilient and trustworthy alternative to centralized financial systems. By leveraging the benefits of decentralization, transparency, and automation, DeFi protocols can help to reduce the risks associated with financial transactions and enable users to have more control over their own assets.

Thousands laid off

The market squeeze forced many companies to announce significant layoffs. In the first wave of layoffs in June 2022, more than 3000 workers lost their jobs. Coinbase reduced its workforce by 18% (1000+ workers), OpenSea announced a 20% reduction, Gemini 10%, Crypto.com 5%, and Bitpanda 270 jobs. The trend has been ongoing. The good news is that there are many positions in high demand. Despite the layoffs, demand for legal and compliance talent continues.

The International Token Standardization Association (ITSA) e.V.

The International Token Standardization Association (ITSA) e.V. is a not-for-profit association of German law that aims at promoting the development and implementation of comprehensive market standards for the identification, classification, and analysis of DLT- and blockchain-based cryptographic tokens. As an independent industry membership body, ITSA unites over 100 international associated founding members from various interest groups. In order to increase transparency and safety on global token markets, ITSA currently develops and implements the International Token Identification Number (ITIN) as a market standard for the identification of cryptographic tokens, the International Token Classification (ITC) as a standard framework for the classification of cryptographic tokens according to their inherent characteristics. ITSA then adds the identified and classified token to the world’s largest register for tokens in our Tokenbase.

  • The International Token Identification Number (ITIN) is a 9-digit alphanumeric technical identifier for both fungible and non-fungible DLT-based tokens. Thanks to its underlying Uniform Token Locator (UTL), ITIN presents a unique and fork-resilient identification of tokens. The ITIN also allows for the connecting and matching of other media and data to the token, such as legal contracts or price data, and increases safety and operational transparency when handling these tokens.
  • The International Token Classification (ITC) is a multi-dimensional, expandable framework for the classification of tokens. Current dimensions include technological, economic, legal, and regulatory dimensions with multiple sub-dimensions. By mid-2021, there will be at least two new dimensions added, including a tax dimension. So far, our classification framework has been applied to 99% of the token market according to the market capitalization of classified tokens.
  • ITSA’s Tokenbase currently holds data on over 4000 tokens. Tokenbase is a holistic database for the analysis of tokens and combines our identification and classification data with market and blockchain data from external providers. Third-party data of several partners is already integrated, and API access is also in development.


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Valentin Kalinov is an Executive Director at International Token Standardization Association (ITSA) e.V., working to create the world’s largest token database, including a classification framework and unique token identifiers and locators. He has over five years of experience working at BlockchainHub Berlin in content creation and token analysis as a project manager at the Research Institute for Cryptoeconomics at the Vienna University of Economics and token analyst at Token Kitchen. You can contact Valentin via valentin.kalinov@itsa.global and connect on Linkedin if you would like to further discuss ITSA e.V. or have any other open questions.

Jonas Surmann is a founding member of DFX Swiss.

Prof. Dr. Philipp Sandner has founded the Frankfurt School Blockchain Center (FSBC). From 2018 to 2021, he was ranked among the “top 30” economists by the Frankfurter Allgemeine Zeitung (FAZ), a major newspaper in Germany. Further, he belonged to the “Top 40 under 40” — a ranking by the German business magazine Capital. He has been a member of the FinTech Council and the Digital Finance Forum of the Federal Ministry of Finance in Germany. He is also on the Board of Directors of FiveT Fintech Fund, 21e6 Capital and Blockchain Founders Group — companies active in venture capital financing for blockchain startups and crypto asset investment management.

Christian Viehof is an Executive Director at the International Token Standardization Association (ITSA) e.V., working to create the world’s largest token database, including a classification framework and unique token identifiers and locators. He completed his Bachelor in Economics at the University of Bonn, the Hong Kong University and the London School of Economics and Political Science with a focus on Behavioral Economics and Finance. Currently pursuing his Master of Finance at the Frankfurt School of Finance and Management, you can contact him via christian.viehof@itsa.global and connect with him on Linkedin, if you would like to further discuss ITSA e.V. or have any open questions.




International Token Standardization Association

The International Token Standardization Association (ITSA) is a not for profit organization working on holistic market standards for the global token economy.