The 2022 crypto collapse, explained: how a 'stable' coin lost its peg, and a major exchange lost customer funds.

Originally reported as: “Algorithmic stablecoin collapse triggers cascading losses across crypto markets”

In May 2022, TerraUSD, a cryptocurrency designed to hold a stable $1 value through an algorithm rather than actual cash reserves, lost its peg and collapsed toward zero within days, dragging its sister token Luna down with it and wiping out roughly $40 billion in combined value. The shock rattled confidence across the crypto industry, and about six months later, in November 2022, one of the largest crypto exchanges in the world, FTX, collapsed after it emerged that customer funds deposited on the exchange had been improperly used by a related trading firm, Alameda Research, run by the same founder. FTX filed for bankruptcy on November 11, 2022, and its founder, Sam Bankman-Fried, was later convicted of fraud. Together, the two events form one of the most significant periods of loss and reform in crypto's short history.