The 10 Heads Of Ravana That Crushed Crypto Industry This Year

This Dussehera, let’s take a look at the 10 events that have played a major role in the crypto market this year
The 10 Heads Of Ravana That Crushed Crypto Industry This Year
The 10 Heads Of Ravana That Crushed Crypto Industry This Year

Today is Dussehera. It signifies the end of the joyous Navratras as well as the victory of good over evil.

In ancient mythology, the 10 heads of Ravana represented his mastery over the six shastras and four vedas. But according to some academicians today, these also represent his flaws, some of which led to the Ramayana war and the eventual destruction of his kingdom, kingship, and kinship.

Incidentally, the crypto industry also went through a rollercoaster ride this year. When 2022 began, the price of Bitcoin, the top-most popular cryptocurrency, was revolving around $47,000. By October 2022, it was at $19,000. The total market capitalisation, which was over $2 trillion at the start of the year, is now below $1 trillion. 

This Dussehera, let’s take a look at the ten events that crushed the crypto industry. 

This Dussehera, let’s take a look at the ten events that crushed the crypto industry. 

1. Taxation on VDAs (Virtual Digital Assets)

Gains arising from transactions in cryptocurrencies became taxable from April 1, 2022, following the Budget announcement to that effect by Union Minister of Finance Nirmala Sitharaman in February of this year.

She announced a 30 per cent taxation on virtual digital assets (VDAs), apart from tax deducted at source (TDS) implications, which came into effect from July 2022.

While the crypto market has been on a downward spiral since early this year, the introduction of taxes has also had an impact on falling volumes of crypto in India. However, investors have also gained from it in some ways.

After the crypto taxation came into effect, major crypto exchanges witnessed a significant dent in their trading volumes.

Trading volumes on WazirX and CoinDCX dropped by at least 80 per cent. According to statistics obtained from data aggregator, trade volumes on Indian cryptocurrency exchanges have significantly decreased after the 1 per cent TDS came into effect from July 1, 2022.

2. ED Crackdowns

In July 2022, according to several media reports, the Enforcement Directorate asked crypto exchanges, such as CoinDCX and CoinSwitch Kuber, for more information and records as part of its investigation into alleged cases of foreign exchange violations.

In August 2022, The Economic Times reported that the ED was looking into at least 10 crypto exchanges for allegedly assisting foreign companies to use cryptocurrency to launder money. According to the report, a government agency determined that the accused companies in the instant lending app case had laundered more than Rs 1,000 crore, and most of the claims had a connection to China.

In the same month, the ED’s Bengaluru Cell searched the premises of the Indian cryptocurrency exchange, CoinSwitch Kuber.

“We are looking into multiple possible contraventions under FEMA and other entities that are connected to it. Since we did not receive the desired cooperation, we have conducted searches on (residences) of directors, the CEO and the official premises of the exchange,” an ED official had then said. 

In the same month, the ED had frozen crypto exchange WazirX’s bank accounts containing Rs 64 crore of the company’s money. It had also raided its premises for alleged violation of the FEMA Act. The ED officials had also searched the premises of one of the directors of Zanmai Labs, which owns WazirX.

In October 2022, the ED froze the cryptocurrency Tether, an Ethereum token tethered to the US dollar, totalling Rs. 47.64 lakh, under the Prevention of Money Laundering Act, 2002. According to a statement from the ED, this followed an investigation of a person by the name of Aamir Khan and others about a mobile gaming application, E-nuggets.

So, ED is continually taking action against cryptocurrency exchanges for mismanagement and fraud. 

3. Russia-Ukraine War 

The Russia-Ukraine War has massively impacted the global cryptocurrency market. 

The global crypto market cap slid to as low as $1.57 trillion, losing almost 9.66 per cent in the last 24 hours on February 24, 2022, when Russia launched a full-scale attack on Ukraine. 

It has for long been suspected that Russia might use cryptocurrency to blunt the impact of the sanctions by bypassing control points. It could also ink deals with anyone globally working with them via digital currencies. 

The price of cryptocurrencies was badly impacted by the war in Ukraine. People felt much more comfortable investing in the safest, most traditional, and consistently successful asset classes during periods of significant geopolitical turmoil.

Despite several efforts made by Ukraine, including launching a new website to facilitate the purchase and sale of non-fungible tokens (NFTs) to raise funds for its ongoing war efforts, the crypto market sentiments did not change much. 

4. Terra Luna Crises 

In May 2022, more than $200 billion was lost in the cryptocurrency market due to the shocking collapse of the Terra Stablecoin. The price of Terra Luna fell by nearly 80 per cent, thus devaluing the coins. It should be noted that Stablecoins follow the economics of demand and supply. To keep the price consistent, any stable currency that is created must be backed by some form of collateral.

Terra’s crypto Blockchain algorithmic Stablecoin, TerraUSD (UST) also lost its 1:1 ratio with the dollar and now trades at $0.6131. Before this upheaval, Terra (LUNA) was among the top-10 cryptocurrencies by market capitalisation, and TerraUSD (UST) was the world’s biggest decentralised crypto Stablecoin, according to Coinmarketcap.

5. US Federal Interests Rates

In July 2022, US Federal Reserve raised the interest rates by 75 basis points, or 0.75 per cent, the highest two-consecutive rate increases since the 1980s. As an outcome, the crypto market soared on July 24, 2022, lifted by price gains in Bitcoin, the top cryptocurrency by market value, which rose to $23,000. 

Then, the Federal Reserve announced another big rate increase in September 2022, and the price of Bitcoin fell to $19,000. Ethereum experienced a sharp decline as well, although for the time being, it maintained steady at over $1,300.

6. Payment Difficulties

On April 7, 2022, a circular by the National Payments Corporation of India (NPCI) stated that they are not aware of any crypto payments happening through the Unified Payments Interface (UPI). This led to UPI platform providers withdrawing their facility from all crypto exchanges, thus denying crypto investors to further use UPI payments for crypto investments. After this, several crypto exchanges blocked their payment systems, and users could not invest in these exchanges using bank methods.

In July, several global crypto exchanges, including Binance paused Bitcoin withdrawals because of severe network congestion. Their team suggested that users use BTC-BNB or BTC-ETH trading pairs to exchange their Bitcoin and withdraw until they fix the problem.

Later on, Celsius Network, a cryptocurrency lending firm, announced to pause all withdrawals and transfers between accounts due to “extreme market conditions”.

Most industry experts told Outlook Money that time that crypto exchanges are halting their withdrawals and deposits as they are running out of liquidity. 

7. Crypto Hacks

DeFi protocols were used in some of the greatest cryptocurrency thefts of 2022, such as the $625 million Ronin network hack of the video game Axie Infinity in March. Since then, some of these thefts, notably the Axie incident, have been linked to North Korean hackers.

According to research published in August 2022 by Blockchain analysis company, Chainalysis, a stunning $1.9 billion worth of Bitcoin was stolen in hacks of various services in the first seven months of this year, a 60 per cent rise from the same period in the previous year.

8. CEOs Back Out From Crypto Market 

The crypto winter saw several crypto founders and co-founders diverting their focus and energy from crypto to other Web 3.0-related projects. 

Recently, Alex Mashinsky, the CEO of the now-bankrupt crypto lender, Celsius, has become the latest person to resign from the top post, after he put in his papers last week. 

Mashinsky’s resignation last Tuesday has left many investors uncertain, which has been the case following similar moves by other crypto exchange CEOs in recent times. 

The spurt in CEO departures has raised serious concerns over investors’ deposits in crypto exchanges.

In August, media reports indicated that ZebPay CEO Avinash Shekhar had quit the oldest crypto exchange to start his own start-up in the Web 3.0 space. His new venture will reportedly deal with crypto tax compliance issues.

Likewise, in February 2022, co-founders Nischal Shetty and Siddharth Menon quit their day-to-day roles in WazirX, India’s leading cryptocurrency exchange backed by Binance. Shetty started his Web 3.0 project Shardeum, while Menon began focussing on the Tegro marketplace for game assets.

These resignations have somehow acted like demons for the confidence of the crypto industry.

9. Bankrupt Three Arrows Capital

According to court records, Three Arrows Capital (3AC) owes a staggering $3.5 billion to 27 different businesses, including, Voyager Digital, and lender Genesis Global Trading.

The information is derived from affidavits that describe the insolvency and liquidation of the cryptocurrency hedge fund in detail. The company hired to supervise 3AC’s liquidation, Teneo, made them public on Monday after filing them on July 7, 2022.

According to the documents, 3AC did not repay loans, and also repeatedly missed margin calls with lenders, which caused its investment accounts to drop below necessary levels, and not be topped up.

10. Volatile Nature of Cryptos

According to research released by Citibank on October 3, 2022, cryptocurrency prices are significantly down from their all-time high, and growing scepticism in Stablecoins as a result of the collapse of terra USD’s (UST) has caused withdrawals from the largest Stablecoin, Tether (USDT).

Although cryptocurrencies like Bitcoin and Ethereum have long been promoted as strong alternatives to the stock market by their ardent and vocal fan bases, the truth has evolved into something a little more complicated. The two types of investments have become more and more associated over the past few months, and dips in the stock market now frequently predict equal or even greater drops in the price of cryptocurrencies.

The Wall Street giant said that “volatility has damaged user adoption”, pointing out that, although trade volumes and active addresses peaked around the time of the Luna (LUNC) collapse, indicating user adoption, they have subsequently returned to previous levels, or even dropped.

“Tentative evidence suggests a reduction in trading volumes and futures positions, but not wholesale declines in investor interest in the space,” Citibank said in its research. 

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