The Rise and Fall of Cryptocurrency Platforms in 2022: Lessons Learned and the Emergence of Upstream

The cryptocurrency market is known for its volatility, and investors often experience highs and lows. However, the term "crypto winter" is used to describe a prolonged period of market cooling, where prices fall and investor sentiment turns negative. The term was first used in 2018 when the price of Bitcoin dropped by more than 50% from its all-time high. Since then, there have been several instances where the market has experienced significant losses, and the events of 2022 were no different.

In May 2022, the cryptocurrency market was already down following the broader market downturn, and then the TerraUSD and Luna token collapsed. This resulted in an estimated $60 billion in losses. TerraUSD is a stablecoin that is pegged to the US dollar, while the Luna token is the native token of the Terra blockchain network. The sudden collapse of these tokens sent shockwaves through the market, causing further losses for investors.

In July 2022, Celsius Network, which enabled users to deposit crypto and earn interest, filed for bankruptcy after barring its 1.7 million users from withdrawing or transferring funds. The platform had been popular with investors looking to earn interest on their crypto holdings, but the sudden bankruptcy left many users stranded with no access to their funds. The incident highlighted the risks associated with investing in cryptocurrency and the importance of due diligence when selecting platforms and services.

July 2022 also saw the bankruptcy of Voyager, a popular crypto brokerage service. The platform had attracted a significant number of users, but it was unable to sustain its operations and filed for bankruptcy. The closure of Voyager resulted in significant losses for its customers, highlighting the risks associated with investing in the cryptocurrency market.

On November 11, 2022, cryptocurrency exchange FTX filed for bankruptcy, with Reuters reporting $1-2 billion worth of customer funds lost. FTX was a popular platform that offered trading in a wide range of cryptocurrencies, and its sudden collapse sent shockwaves through the market. The incident once again highlighted the risks associated with investing in the cryptocurrency market, particularly with platforms that are not regulated or have weak security measures in place.

Later in November 2022, cryptocurrency firm Blockfi filed for bankruptcy protection. Blockfi is a platform that offers loans and interest-bearing accounts to investors, and its bankruptcy filing sent further shockwaves through the market. The incident highlighted the importance of due diligence when selecting platforms and services, particularly in the cryptocurrency market, where there is often little regulation and oversight.

The events of 2022 have had a significant impact on the cryptocurrency market. The market cap of the largest 100 cryptocurrencies was $2.7 trillion on November 24, 2021, but as of November 14, 2022, it had fallen to about $837 billion. The market downturn has resulted in significant losses for investors, particularly those who had invested in platforms that were unable to sustain their operations.

Upstream's approach is unique in the sense that it blends both the blockchain and traditional capital markets, achieving a balance between decentralization and centralization. This strategy is proving to be invaluable, as it recognizes the importance of technology in enhancing compliance rather than supplanting it. As such, Upstream boasts several distinguishing features that set it apart from cryptocurrency and other blockchain-powered markets.

1. Upstream is a Web3 platform, which means it is more advanced than Web2 platforms like FTX. Users sign up using a public blockchain wallet and KYC data is kept in memory, not on servers.
2. Upstream is non-custodial, meaning traders have complete control of their private keys and assets. Private keys are like a pin code to your ATM card, and are unlocked using biometrics for added security.
3. Upstream uses FDIC-insured accounts to protect users' funds, and only accepts the USDC stablecoin as cryptocurrency. Trading pairs are against USD, and funds can only be sent to and from the verified account during KYC.
4. Upstream is a blockchain-powered stock and NFT market, not a cryptocurrency market. Trades are executed on-chain and orders are displayed on a public orderbook for transparency.
5. Upstream has necessary failsafes in place to protect users' assets, including integrated KYC technology and a regulated custodian to maintain a parallel record of all asset ownership. This allows assets to be lawfully restored to their rightful owner in exceptional cases.

The events of 2022 have highlighted the risks associated with investing in the cryptocurrency market, particularly with platforms that are not regulated or lack robust security measures. As investors navigate this volatile landscape, it is crucial to conduct thorough due diligence and choose platforms that prioritize transparency, security, and compliance. While the market may continue to experience highs and lows, emerging platforms like Upstream, which blend blockchain and traditional capital markets, offer a unique approach to mitigating risks and enhancing investor protection. As the cryptocurrency market continues to evolve, it is essential to stay informed, cautious, and vigilant in managing investments.

Learn how to open your Upstream account today.

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