Investors in cryptocurrencies have endured a lot so far in the past year. Several large companies and projects have gone under and the price of bitcoin and all altcoins have had to drop considerably.
Terra, Celsius and 3AC
It all started in May with the crash of the Terra ecosystem (LUNA). The algorithmic stablecoin terraUSD (UST) lost its peg (peg) with the US dollar and also pulled the price of LUNA down with it. The debacle eventually led to a major crash for bitcoin (BTC) and the rest of the crypto market.
The crypto market storm continued after crypto lending platform Celsius and crypto hedge fund Three Arrows Capital (3AC) filed for bankruptcy. According to data from crypto analytics company Chain analysis the demise of the Terra ecosystem caused a $20.5 billion realized loss for investors. The bankruptcies of Celsius and 3AC resulted in a realized loss of $33 billion.
A realized loss is a loss that arises when an investment is sold at a price lower than its purchase price. On the other hand, there is an unrealized loss, which is also referred to as a ‘paper loss’. On paper you are in the red, but as long as you have not sold an asset it remains an unrealized loss instead of a realized loss.
FTX debacle
The FTX debacle has led to a realized loss of ‘only’ $9 billion, according to Chainanalysis. However, the analytics firm admits that the demise of FTX was probably the most impactful event for some, as they will lose funds they had on the exchange and the likelihood of recovering them is unknown.
Chainanalysis’ conclusions come after measuring realized gains and losses for a range of personal wallets over a period of time.
Just as the demise of the Terra ecosystem had started a domino effect, the first major victim of the domino effect of FTX has also been known for a while. For example, you could read in the Bitcoin news earlier that Crypto lending platform BlockFi had filed for bankruptcy a few weeks ago after it ran into problems due to the collapse of FTX.