Remember Terra? Do Kwon’s layer 1 was designed in such a way that its native token, LUNA, worked in tandem with the network’s algorithmic stablecoin, UST. When you minted new UST, you destroyed LUNA tokens (thereby constricting supply), and when you redeemed UST, you created new LUNA (expanding supply).

That system worked wonderfully as long as UST experienced great demand — which it did, for a while, thanks to a 20% yearly interest on the coin supplied by Anchor Protocol. But in May 2022, huge selloffs caused UST to lose its $1 peg; market participants rushed to redeem their UST, creating a massive new amount of LUNA and pushing the token’s price down, which of course led to more UST redemptions, and so on. Over $40 billion in market value was obliterated in 72 hours.

Terra’s collapse shook the crypto industry, which back then was levered to the gills. Crypto hedge fund Three Arrows Capital blew up , while crypto lenders such as Voyager , BlockFi and Celsius went bust. If that wasn’t enough, the U.S. imposed sanctions on Ethereum’s Tornado Cash, sending developers all over the world in a bit of a panic.

After CoinDesk’s Ian Allison reported in November 2022 that Alameda was quite possibly broke, people started yanking their funds out of FTX, which led Bankman-Fried to freeze withdrawals. It turned out that SBF had been fraudulently using FTX customer funds to palliate losses incurred by Alameda Research over the course of the years. Bankman-Fried was arrested (and subsequently sentenced to 25 years in prison) shortly after FTX filed for bankruptcy.

Shortly after FTX’s demise, SEC Chair Gary Gensler began an aggressive campaign against the sector, suing a huge number of crypto firms (including Coinbase and Kraken ) and ushering in an era of “regulation by enforcement” that was decried by the industry and friendly members of Congress alike.

That wasn’t the end of crypto’s tribulations. Crypto lender Genesis and bitcoin miner Core Scientific were soon added to the list of casualties. Worse, in March 2023 three crypto-friendly banks (Signature, Silvergate and Silicon Valley Bank) suffered from bank-runs and collapsed , making it significantly more difficult for crypto firms to access the banking system. Nic Carter, a prominent crypto VC, accused the Biden administration of trying to debank the crypto industry by employing an Obama-era strategy, a theory which has since gained traction within Congress and the Trump administration.

But the winds of fortune finally turned in crypto’s favor. When BlackRock filed for a spot bitcoin ETF in June 2023, it felt like Larry Fink himself was shooting a flare in the dark, signaling that Wall Street was ready to embrace crypto. Two months later, Grayscale defeated the SEC in court on the matter of converting its bitcoin trust into an ETF. The agency had little choice than to greenlight a dozen spot bitcoin ETFs in January 2024, which later became the most successful new ETFs of all time.