In 2023, the cryptocurrency world was rather dismal, with litigation, arrests, and a winter for Bitcoin.
Sam Bankman: Arrested, Do Kwon, and Su Zhu put on trial
Users lost billions of dollars when FTX, the third-biggest cryptocurrency exchange in the world, crashed in late 2022. Sam Bankman-Fried, one of the co-founders, entered a not guilty plea during his first trial in January. Bankman-Fried was found guilty on all seven counts of deceiving users during the trial in October. He has until March 28, 2025, to file an appeal, after which he might serve up to 115 years in jail.
After spending six months on the run, Do Kwon, the creator of Terraform Labs, was apprehended in Montenegro in March. The Luna issue last year, which led to the collapse of a cryptocurrency project valued at over $40 billion in only two weeks, is said to have been triggered by the South Korean CEO. According to Cointelegraph, this is the biggest loss event in the blockchain industry’s history and the catalyst for the several significant cryptocurrency firms that filed for bankruptcy one after the other. Kwon is still being held and may be extradited for a trial to the US or South Korea.
Zhu Su, a co-founder of Three Arrows Capital (3AC), was detained in Singapore until September. Su and his associates once controlled cryptocurrencies valued at about $10 billion USD, however they left the firm after making errors that led to its bankruptcy. With this arrest, the main suspects in the string of bitcoin crises over the previous two years have been apprehended.
CEO of Binance steps down amid crisis
The biggest cryptocurrency exchange in the world, Binance, has repeatedly into afoul of the law in several nations in 2023. The CFTC filed a lawsuit against Changpeng Zhao (CZ) and Binance in March for allegedly breaking the law and aiding in money laundering. The exchange was sued in June by the US and France for allegedly manipulating bitcoin prices.
Billionaire CZ’s company was forced to exit the Dutch and Canadian markets, and its operations in the UK and Germany were also denied permission to do business. In Asia, the exchange had challenges while attempting to offer services in China, Indonesia, and Thailand, and it was restricted in the Philippines.
CCData records show that the exchange’s market share has consistently declined, falling from 55% in January to 30.1% in December. The trade volume processed by Binance decreased by 70% in the first nine months of the year, from 474 billion to 114 billion USD. Important financial allies like Mastercard and Visa also declared their suspension of their business with Binance. The US authorities compelled BUSD, the second-largest stablecoin on the market and one that Binance supports, to cease issuance, and it had to be delisted at the start of the year.
CZ abruptly announced his retirement as CEO at the end of November and entered a guilty plea in a Seattle, USA, court for breaking anti-money laundering laws. Cointelegraph reports that this is a significant setback for Binance as the billionaire’s image has been connected to the platform since its establishment in 2018. At now, Binance is facing an unprecedented fine of USD 4.3 billion. CZ was personally fined $150 million USD, prohibited from taking on a leadership role within the corporation for three years, and prohibited from traveling outside of the country until the court’s February sentencing in the following year.
Hacker losses drop by half
About 160 instances of attacks against blockchain networks were reported during the year. Nonetheless, compared to the previous year, there was a 50% reduction in the financial harm. Cryptocurrency thieves took around 4 billion USD in 2022, compared to 1.7 billion USD as of November. Experts surmise that this shift is mostly due to three factors: enhanced security protocols; increased dissemination of information and alerts; and legal intervention.
Large-scale projects are the focus of hackers, as evidenced by the fact that the top 10 attacks of the year caused 70% of the overall damage. Attacks on platforms including Mixin Network, Euler Finance, Multichain, and Poloniex resulted in losses over $100 million USD.
Additionally, the hacks grew increasingly complex. Experts saw the Vietnam-related Kyber blockchain network event, which involved the theft of 47 million USD in late November, as the “most complex attack in the history of DeFi.” Malicious smart contracts, such MS Drainer, stole USD 59 million from 63,000 bitcoin gamers while they were being promoted on Google and social media X.
Bitcoin surpasses $40,000
For the first three quarters of 2023, the cryptocurrency community was under a cloud of doom due to the bleak news. Nonetheless, there was a resurgence in the final month of the year when Bitcoin hit 40,000 USD, the highest level since April 2022. Many other cryptocurrencies had significant price increases as well. For example, Solana saw a 20-month price record rise from 84 to 110 USD.
Cointelegraph reports that the possibility of the U.S. Securities and Exchange Commission (SEC) approving BlackRock’s Bitcoin spot exchange-traded fund (ETF) has greatly heightened the enthusiasm of Bitcoin enthusiasts. Since the fourth halving event is set for May 2024, it is anticipated that the price of Bitcoin will continue to climb in the interim. Every four years, the reward for mining a block of Bitcoin is half, an occurrence known as halving. 2012 saw the first Halving. Josh Siegler, an analyst at Cantor Fitzgerald, claims that since this helps to restrict the amount of Bitcoin available, it will likely spark a fresh surge and the problems facing it this year will only be temporary.
In 2023, the cryptocurrency world was a mixed bag. The arrests of Sam Bankman-Fried, Do Kwon, and Su Zhu, the downfall of Binance, and the rise in hacking attempts were only a few of the unfavorable incidents. Positive indicators did exist, though, and these included the decline in hacking losses, the growth of Bitcoin, and the possible approval of a Bitcoin ETF.
Whether the positive indicators can surpass the negative ones in 2024 is yet to be determined. But since the cryptocurrency community is still relatively new and developing, it is probably going to continue going through ups and downs in the years to come.