NFA.

DYOR.

1. Regulation

Almost all the governments represented by the US and the EU have been working on a regulatory framework since the last crypto market boom.

In March 2022, President Biden signed Executive Order on Ensuring Responsible Development of Digital Assets, where the first whole-of-government approach to addressing the risks and harnessing the potential benefits of digital assets and their underlying technology was outlined.

The Order establishes a National Digital Assets Policy covering six key priorities: consumer and investor protection, promoting financial stability, countering illicit finance, U.S. leadership in the global financial system and economic competitiveness, financial inclusion, and responsible innovation.

And with the number of adverse events that affected the market in 2022, regulating the sphere looks like a necessary step for further development.

2. De-anonymization

De-anonymization in the blockchain industry is not something entirely new. Verification through the KYC system has been required for a long time to receive exchange services or participate in events. However, in 2022, for the first time on the market, Binance proposed a new way of verification, which, in my opinion, will become a gold standard for the whole industry in the future.

It is about the Binance Account Bound token. BAB token is a soulbound token (NFT equivalent) permanently attached to your wallet (Trust Wallet, Metamask, etc.). BAB is unique and cannot be sold, transferred, or burned. For now, BAB has supported and plans to integrate more than 15 popular web3 projects, including ApeSwap, GALXE, P12, Ultiverse, OpenOcean, LiveArtX, and others.

There are unique project benefits for BAB token holders. But it looks like access to such projects will only be available through BAB tokens or their counterparts in the future.

3. Central Bank Digital Currencies

One of the most popular subjects in 2022 was CBDC. News about the development of CBDCs in different countries came out almost every week. Since the beginning of this year, geopolitical conditions have changed dramatically, military conflict has erupted, and the number of countries that allow a CBDC pilot project has doubled. The number of countries doing research in this area has increased as well.

Shortly, some countries will begin to trade with one another through digital currencies. And other countries will have an overwhelming desire to join this process - especially those who deal with China.

In the crypto community, CBDC is a source of concern. At the same time, some experts consider it the basis of the future economic system.

4. The era of bridges

By the end of 2022, the number of Layer1 and Layer2 blockchains exceeded 120. As cross-chain demand grows, bridges become one of the most critical infrastructures.

Согласно последним данным DeBridges.com, в настоящее время на стадии реализации находится более 110 проектов межсетевых мостов, общая стоимость которых составляет более $16,4 billion.

According to the latest DeBridges.com data, more than 110 cross-chain bridge projects are under development, the total cost of which is more than $16.4 billion.

Currently, cross-chain bridges interact mainly with the most popular L1 chains, such as the number of cross-chain bridges on Ethereum, Binance Smart Chain, and Polygon reached 101, 74, and 48, respectively. The emergence of new high-performance and modular L1 networks will inevitably lead to more bridges between the networks.

5. GameFi AAA titles

The development of NFTs, as an integral part of GameFi, has led to an increasing number of major players and game development giants from web2 learning about web3 space.

Therefore, the first big names are expected to appear soon, bringing exciting gameplay processes to GameFi and creating play-to-earn games where the word «play» will really come first.

6. Mass adoption

NFTs are at the starting point of the largest mass adoption in history. Facebook, Instagram, Nike, Adidas, D&G, Gucci, Prada, Tiffany&Co, Porshe, Lamborgini, FIFA, etc. All the biggest web2 players will soon come to the web3 space, so we are waiting for another NFTs boom. Perhaps, this is not about the price of specific collections but about the number of mints, trading volumes, as well as availability for new market participants.

Now the NFT seeks to acquire «value», but soon any «value» will seek how to take the form of the NFT.

1. Terraform Labs

Terraform Labs is a cryptocurrency company responsible for developing and supporting Terra Network and Anchor Protocol. The company created $UST, TerraUSD algorithmic stablecoin, which later unpegged from the US dollar, causing Terra's collapse and market dumping. $LUNA, Terra Network’s governance token and cryptocurrency with over $40 billion market cap, became useless when $UST lost its peg to the US dollar. And it was only the beginning of deep troubles for the crypto market.

https://mirror.xyz/coldsprinq.eth/m6tJ9sDcG9d43O9aL-VyqdWFVyCabYrVjfwjdavHzIc

2. Three Arrows Capital

Three Arrows Capital is a cryptocurrency hedge fund in Singapore. Until March 2022, Three Arrows Capital held assets worth $10 billion, known as one of the most famous crypto companies in the world. However, an investment of $200 million in $LUNA was one past error that led to bankruptcy. The company had to declare bankruptcy on June 29, two days after it received a notice of default from Voyager Digital.

Three Arrows Capital default amount exceeds $650 million as of June 2022. Since then, a British Virgin Islands court has been obliged to liquidate the company’s assets.

https://mirror.xyz/coldsprinq.eth/9b5LmxYLwPykyGSMWzZGsgM_V-3jjPspz0a_guQJRxM

3. Voyager Digital

Voyager Digital is an American cryptocurrency lending company operating mainly in the United States and Canada. On July 6, Voyager Digital announced that it applied for bankruptcy protection after losing over $650 million in debt to Three Arrows Capital. Despite a rescue loan from Alameda Research, owned by FTX founder Sam Bankman-Fried, bankruptcy is the inevitable final of Voyage Digital. The company had more than 100000 creditors at the time and liabilities ranging from $1 billion to $10 billion. FTX decided to acquire Voyager Digital for $1,4 billion. But later…

4. FTX

By October 2022, FTX was one of the largest Centralized Exchanges in terms of Market Volume. However, only one article by CoinDesk and a tweet from Changpeng Zhao (CEO of Binance) could tarnish the reputation of the Exchange, so much so that a sales panic could ensue. In fact, there were a lot of intelligent arguments to create a FUD around FTX. As a result, there was a liquidity crisis*, following which FTX froze withdrawals from the Exchange, and at least $1 billion of customer funds vanished.

https://mirror.xyz/coldsprinq.eth/-EssobbtIt4f8DMyOP6QLAqQhZ1teNqN3btBVRzgo_4

5. Celsius Network

Celsius Network is an American and Israeli cryptocurrency company. The company was once a leader among cryptocurrency lending platforms. However, in June 2022, trading and withdrawals on the platform were stopped, and user assets worth about $12 billion were frozen. On July 4, the company laid off about a quarter of its employees; on July 13, Celsius Network applied for bankruptcy protection.

*The FTX incident involved Celsius' assets worth about $354 million.

6. Babel Finance

Babel Finance is a cryptocurrency lending platform based in Hong Kong. In June, the company reported that it faced unprecedented liquidity problems due to the unstable crypto market state and stopped withdrawals for users. Babel Finance was one of many companies devastated by Terraform Labs and Three Arrows Capital, causing a massive freeze of billions of dollars.

7. CoinFLEX

CoinFLEX is an Exchange that offers futures trading services. The company temporarily closed all withdrawals in June due to the recent crypto market state. Later, CoinFLEX announced plans to return the outstanding funds worth $84 million. The Exchange also partially opened a withdrawal with a 10 percent limit, leaving 90 percent of the user’s balance as blocked funds that users cannot withdraw or trade. This incident happened because one of CoinFLEX’s borrowers failed to make a $47 million guarantee deposit. Now the CoinFLEX debt is estimated at $84 million.

8. BlockFi

BlockFi is one of the world’s leading crypto companies providing financial services and loans. This year the company got almost $80 million in losses from Three Arrows Capital’s debts. BlockFi announced a plan to cut nearly 20% of its payroll in June.

FTX subsequently acquired BlockFi for $240 million. You already know how that ends for FTX, right? BlockFi announced a bankruptcy offer in this incident due to the vast FTX risk, and all withdrawals were suspended.

9. Genesis

Genesis is a well-known crypto trading company that provides cryptocurrency exchange, credit/loan, storage, and brokerage services. Total assets managed by the company exceed the amount of $10 billion. In the FTX incident, Genesis’ assets worth $175 million were stuck. On November 16, Genesis announced suspending all new loans and repayments. Now the company is looking for an emergency loan sufficient to pay buyback requests.

10. Vauld

Vauld is a Singapore cryptocurrency company that provides credit and investment services to more than 800000 customers. On July 4, the company announced that all withdrawals and deposits for customers were closed. Darshan Batija, CEO of Vauld, said that unpredictable and unstable market conditions put the company in financial difficulty. Vauld successfully operated for about four years and attracted $27 million through VCs such as Coinbase Ventures. Vault also faced liquidity problems due to the collapse of Terraform Labs and other institutional crises.

Metaverse is a new web app and social network type that implements many innovative technologies and combines real and virtual worlds into a single whole. As mentioned before, Metaverse works based on VR technologies, which provide an exciting experience and project the real world into the digital mirror reflection.

MetaFinance is the inner economy model based on blockchain technology, enriching the virtual world with real-world inputs such as the economy and identification system and rewarding users for social interaction and content creation. Metaverse core includes a range of advanced technologies, such as cloud computing, advanced displays, neural interfaces, robotics, artificial intelligence, and blockchain, of course.

According to Statista.com, the Metaverse market volume reached $38,5 billion in 2021, $47,48 billion in 2022, and is expected to reach $678,8 billion in 2030. So, be sure to pay attention to perspective projects in this segment and…

Ready Player One.

Unfortunately, projects based on unsustainable profit models and the fleeting media hype were doomed during the bear market. According to Footprint Analytics’ on-chain data, the growth of GameFi projects slowed significantly in May, with only 41 new projects launched during the month, far fewer than the number of projects launched in Q1 2022. By the end of the year, Binance Smart Chain had become the most extensive GameFi ecosystem. There are over 580 projects in the network today.

The running app STEPN introduced the move-to-earn economic model in the first half of this year. All kinds of scenarios, including sports, learning, singing, or even sleep, were used as input in the do-something-to-earn model, transforming real-life experience and turning it into cryptocurrency tokens. STEPN became the most popular GameFi project in Q2 2022. But now, it’s far behind the top games based on blockchain, which means that the unsustainable gaming economy does not contribute to the project’s long-term growth. The maximum number of daily STEPN participants reached 100000 in May, and now less than 10000.

Meanwhile, Alien Worlds and Splinterlands, two dark horses from GameFi, now dominate the market. Players still prefer these projects, even though the price of tokens has fallen and the ROI has declined. It also suggests that gameplay itself can prevent asset inflation during serious market failures. Therefore we see the transition of the first major players from the web2 gaming industry to create AAA titles in the web3 space.

In 2017, The Ethereum Name Service was launched as a pioneer of crypto wallet domain names. ENS quickly became the leader of the decentralized identification segment in web3. The market capitalization of ENS domains is $96 million (about 52720 $ETH), which is 90% of the entire domain name segment. By 2022, ENS had the largest market share in the domain name segment, outperforming its competitors in sales and quality.

Domain names have shown explosive growth this year. Now, having your domain name service is the gold standard for any Layer1 and Layer2 blockchain. Ethereum with .eth, Binance Smart Chain with .bnb, Solana with .sol, Aptos with .apt, etc. Do you still doubt that we are moving towards mass adoption?

The Merge is a landmark event for the cryptocurrency market. For Ethereum, this is a crucial step to improve performance further, and the move to proof-of-stake lays the groundwork for subsequent Ethereum sharding and scaling.

For the industry, the Merge led to the abandonment of mass GPU mining, and miners will have to switch to alternative chains or leave. As Ethereum is gradually upgraded to correct the flaws, other POS networks will inevitably become less competitive. From a deeper perspective, the Merge represents a significant change in response to the global call to reduce carbon emissions. As a result, switching Ethereum from PoW to PoS will reduce global energy consumption by about 0.4% per year.

FTX was founded in 2019 by Sam Bankman-Fried with its subsidiary Alameda Research. Three years from its inception to its collapse, the FTX developed into a $24 billion market capitalization tycoon and became the industry’s second-largest centralized exchange. The SBF had $15.6 billion in personal assets. But within a week, all those assets were destroyed.

Coindesk pulled the trigger by publishing the FTX balance report. Then Changpeng Zhao, CEO of Binance, announced that he would sell his FTT assets to insure against risk. It caused panic and led to a drop in the $FTT token price.

The FTX incident caused catastrophic damage to the crypto market. As leading cryptocurrency companies, FTX and Alameda have been involved in numerous projects, especially during the bear market this year. They have repeatedly come to the aid of companies during the crisis, portraying a central bank in the cryptocurrency industry. FTX has invested in over 110 projects.

In addition to the market collapse and losses on the companies and projects involved, the incident also impacted the entire ecosystem, as centralized exchanges faced unprecedented mistrust as the most direct victims. Since the outbreak, all major centralized exchanges have been under pressure from massive user withdrawals, indicating a considerable suspicion of current users to centralized exchanges driven by panic.

In response, major centralized exchanges have taken corrective actions, such as disclosing reserve confirmation, calling for a code of conduct, and allocating funds for industry revitalization.

In the long run, however, the ecosystem will be subject to significant changes: decentralized exchanges may become popular again, as there is still a tendency to distrust centralized exchanges. The industry will be in better shape as the market calms down slowly.

As a result of these events, the US government opened an investigation into the main actors. Sam Bankman-Fried was arrested and charged with life imprisonment. By the end of 2022, Sam had been released on a $250 million bond.

But that's not the end of the FTX investigation. Tens of thousands of investors have lost their funds, and it can’t be left to chance. Now there are more and more prerequisites for regulating the industry, and it seems that this will be a new stage in developing the cryptocurrency sphere.

Immediately after the fall of Terra, news spread that Three Arrows Capital was facing liquidity problems and that the company was suspected of misappropriating clients' funds. On June 14, 2022, Su Zhu removed the digital currency tab from his Twitter account profile on the social network (which included ETH) and tweeted: «We are in the process of communicating with relevant parties and fully committed to working this out». However, Su Zhu didn’t specify the exact content of the «question» he answered.

The following week, Voyager Digital, a digital assets broker, announced that it had lent 15250 $BTC and 350 million $USDC to Three Arrows Capital. It was more than $675 million at the moment. Voyager Digital called on Three Arrows Capital to repay all outstanding loans by June 27 or before default. Three Arrows Capital failed to repay the loan on time, and then Voyager Digital sued Three Arrows Capital for compensation. After the incident went public, other Three Arrows Capital lenders, including Genesis Global Trading, BlockFi, BitMex, FTX, and Blockchain.com, demanded repayment of their loans. Three Arrows Capital was forced to liquidate and sell 80000 $stETH (over $84 million) in the $stETH/$ETH liquidity pool on the Curve, which led to unpegging $stETH (1 $stETH cost around 0,94 $ETH).

As more and more institutions found the hopeless debts of Three Arrows Capital, the whole industry was terrified, and money continued to slip off the scene. Since then, the crypto industry has faced the «Lehman moment*».

*The term «Lehman Moment»* refers to a situation in which the problems of one company or one seemingly minor component of the economy turn out to be so large that they become everyone’s problem. The term is a reference to the 2008 bankruptcy of Lehman Brothers, then the eighth-largest investment bank in the United States. The bankruptcy triggered a considerable stock market downturn and put such pressure on the rest of the financial industry that the federal government stepped in with a $700 billion program of bailouts and arranged mergers to stabilize the financial system. And the problem was not limited to the U.S. It spread globally and became the 2008 global financial crisis.*

Founded in 2018, Terra, a blockchain for payments, was built on a two-currency mechanism: stablecoin $UST & governance token $LUNA. In early 2022, Do Kwan, Co-founder of Terraform Labs, announced the Anchor Protocol: 20% annual return on $UST deposits.

It has attracted many investors for its high yields and decentralized nature. After the Anchor launch, most of the $UST coins on the market were deposited into the protocol. Even before the collapse of the Terraform Labs, nearly 75 percent of $UST coins (up to $14 billion) were on Anchor. Many investors have borrowed $UST to deposit additional cryptocurrency assets to earn 20% per year out of $UST. When demand for $UST skyrocketed, the $LUNA price exceeded $100, and $UST became known as the biggest decentralized stablecoin, emitting more than $15 billion.

The collapse of Terra led to countless market losses: the $UST price fell to $0.2 in a few days, and the $LUNA price fell almost to zero. Terra’s market capitalization evaporated by $40 billion, and many investors suffered severe damage. In addition, the 80,000 bitcoins sold by the founders worsened the market as the $BTC price fell daily, leading to a deeper bear market.

And welcome to Cerebright!

We are the community of authors and creators in the blockchain industry. Today we begin our journey to create an extensive encyclopedia of crypto knowledge. We have prepared a wealth of valuable materials for publication, including alpha information that we will share with you.

Subscribe to our Medium channel and Twitter profile to catch the upcoming articles.

Back to today’s article. Many newcomers in crypto make the same mistakes. Today, we want to give five tips to those who have just begun their journey in crypto, based on our experience of five years.

1. Buy a hardware wallet

This is not the most obvious advice to beginners, but it will protect the lion’s share of your finances.

When asked about secure storage, it is worth starting with the fact that any cryptocurrency is stored in a blockchain, and any cryptocurrency wallets are just a set of software to interact with the blockchain. In simple terms, this interface provides access to handle your private keys in various blockchain networks.

The private key is a type of PIN that gives you access to your “bank” account. It provides access to your cryptocurrency, allowing you to receive and send coins to anyone worldwide.

When you use a Centralized Exchange (CEX), you only use the interface with your virtual account, and signing transactions are done through internal software. It means the Exchange is a custodian or financial agent holding all your funds.

Have you heard anything about the recent FTX crash? If you don’t, you’re in luck. By October 2022, FTX was one of the largest Centralized Exchanges in terms of Market Volume. However, only one article by CoinDesk and a tweet from Changpeng Zhao (CEO of Binance) could tarnish the reputation of the Exchange, so much so that a sales panic could ensue. As a result, there was a liquidity crisis, following which FTX froze withdrawals from the Exchange, and at least $1 billion of customer funds vanished.

Tip #1: Not your keys, not your coins. Store on the exchanges only the amounts required for spot or futures trading. Store the rest in a hardware wallet.

2. Beware of scammers

Intruders create new kinds of scams every day. Some of them you will encounter daily on Twitter and Discord; other ways are a little more challenging to implement, which is much more dangerous, but most of these methods are somehow associated with interacting with suspicious or substituted links.

Tip #2: Use two-factor authentication, configure incoming messages blocking from suspicious persons, and always double-check the links you interact with.

3. Observe the risk management

Oddly enough, this is the advice that is most difficult to follow. It is all about human psychology. Once you find a new gold mine, the temptation to move most of your trustworthy assets here is too great to recoup quickly and earn extra. Have you heard anything about move-to-earn and how to make money just walking down the street? This has enriched some people with access to alpha information, but most have lost their funds, many of whom have transferred their trustworthy assets to such projects. No matter which games you play, it’s important to remember that you always play against the market.

Tip #3: Allocate no more than 1–2% of your portfolio for the most high-risk investments. When investing, focus on the fundamentals. Such projects can be found in our research articles.

4. Learn how NFTs work

NFT is a new stage in the development of the cryptocurrency space. And it is not even a possible short-term profit (although in it too). It will affect audio, photo, and video content, social media, and many areas of daily life, like real estate, business, traditional finance, and more. All this leads to NFT becoming the new standard for identifying user copyright in web3 space.

Tip #4: Read «How to Defi» and «How to NFT». There is plenty of useful information to help you navigate through space.

5. Real G’s move in silence

Sell when everyone is buying; buy when everyone is selling. Stay calm and always do your own research.

Tip #5: Remember why you are here. Remember what brought you into this space. Ignore the noise. Stay focused. Take what is yours.

And remember to subscribe to our Medium channel and Twitter profile. The journey begins right now.