Close Menu
Crypto Junction
  • Crypto News
    • News
    • Bitcoin
    • Blockchain
    • BNB
    • Dogecoin
    • Ethereum
    • Litecoin
    • Meme Coins
    • Solana
    • Toncoin
    • XRP
  • Business
  • Markets
  • Regulation
  • Guides
  • Press Release
What's Hot

EVAA: TON’s $1.4B DeFi Protocol Becomes Community-Owned DAO With $EVAA Token

October 15, 2025

Pardon for Binance CEO CZ? Trump’s Move Stuns Markets

October 14, 2025

China Tariff News Triggers Crypto Crash — Bitcoin Hits $102K!

October 14, 2025
Facebook X (Twitter) Instagram
  • Altcoin News
  • Bitcoin News
  • Dogecoin News
  • Ethereum News
  • Litecoin News
  • Meme Coin News
  • Solana News
  • XRP News
X (Twitter) Telegram
Crypto JunctionCrypto Junction
  • Crypto News
    • News
    • Bitcoin
    • Blockchain
    • BNB
    • Dogecoin
    • Ethereum
    • Litecoin
    • Meme Coins
    • Solana
    • Toncoin
    • XRP
  • Business
  • Markets
  • Regulation
  • Guides
  • Press Release
Crypto Junction
Home » Crypto Crash 2022: Can the Market Recover from Terra and 3AC’s Collapse?
Crypto

Crypto Crash 2022: Can the Market Recover from Terra and 3AC’s Collapse?

Karly MarieBy Karly MarieJune 25, 2022Updated:March 13, 20255 Mins Read
Share Facebook Twitter Pinterest Reddit Telegram Email Bluesky Copy Link
Share
Twitter Facebook Telegram Bluesky Pinterest Email Reddit Copy Link

The cryptocurrency market experienced unprecedented volatility in 2022, shifting from record-breaking highs in 2021 to a devastating crash. In November 2021, Bitcoin (BTC) peaked at $68,789, and Ethereum (ETH) reached $4,891, fueled by institutional adoption and a wave of retail investors. However, as 2022 unfolded, rising global inflation and aggressive monetary tightening by central banks caused capital to flow out of risk assets, leading to crypto’s steep decline.

The situation worsened in May 2022 with the dramatic collapse of Terra’s ecosystem, followed by the implosion of hedge fund Three Arrows Capital (3AC). Investor sentiment plummeted, and the market faced liquidity crises, forced liquidations, and withdrawal suspensions across multiple platforms.

The Terra Collapse: A Domino Effect on DeFi

At the heart of the crisis was Terra’s algorithmic stablecoin, TerraUSD (UST), which promised a near-20% yield through the Anchor Protocol. To support its stability, Terra’s Luna Foundation Guard (LFG) accumulated a reserve of over 80,000 BTC and various other assets.

However, in May 2022, UST lost its peg to the US dollar. To counter this, LFG sold off its Bitcoin reserves in an attempt to stabilize the coin. The move failed, leading to a massive capital flight of nearly $63 billion from the DeFi sector. Terra’s native token, LUNA, crashed from $64 to virtually zero, wiping out investors and causing panic across the crypto market.

Three Arrows Capital (3AC): A Crypto Giant’s Fall

As the Terra crash unfolded, it exposed vulnerabilities in major crypto investment firms. Three Arrows Capital (3AC), once managing over $10 billion in assets, suffered devastating losses. It had heavily invested in Terra’s ecosystem, with reports indicating that 3AC had borrowed funds to invest nearly $560 million in LUNA on Anchor Protocol.

See also  Bitcoin Price Plunge Sparks Fresh Market Crash Fears

As Bitcoin and Ethereum prices nosedived, 3AC’s leveraged positions were forcibly liquidated, triggering a cascading sell-off. The hedge fund defaulted on loans, and by mid-June, it was insolvent. The shockwaves spread across the industry, affecting lenders like BlockFi and crypto platforms like Voyager Digital.

The Celsius Crisis: DeFi Platforms Under Fire

Adding to the turmoil, leading crypto lending platform Celsius froze customer withdrawals on June 13, citing “extreme market conditions.” Celsius had significant exposure to staked ETH (stETH), a derivative asset from the Ethereum staking process. As liquidity dried up, concerns about Celsius’ solvency intensified, putting more pressure on the already struggling market.

With Celsius owing over $450 million in debts and holding illiquid stETH assets, fears of further liquidations threatened to push crypto prices lower. The company hired restructuring lawyers, raising speculation of a potential bankruptcy filing.

Market Sentiment: Is the Worst Over?

By mid-June, Bitcoin had dropped to $17,567—its lowest price since December 2020. Ethereum fell below $1,000 for the first time in 18 months. However, a minor relief rally saw BTC recover above $20,000 and ETH cross the $1,000 threshold as investors capitalized on discounted prices.

Despite the bounce, analysts remain cautious. The broader economic environment remains uncertain, with the US Federal Reserve raising interest rates aggressively. Inflation hit a 40-year high of 8.6% in May, prompting the Fed to increase rates by 75 basis points—the largest hike since 1994. More rate hikes are expected, tightening liquidity further and keeping risk assets like crypto under pressure.

What’s Next? Will Crypto Recover in 2022?

The road to recovery remains unclear. Several factors could influence crypto’s trajectory in the coming months:

See also  Sol Token Unlock Raises Concerns As Solana Price Drops

1. Federal Reserve’s Monetary Policy

Crypto’s 2021 bull run was driven by cheap liquidity and stimulus measures. With interest rates rising and liquidity tightening, the market may struggle to regain momentum unless macroeconomic conditions improve.

2. Ethereum’s Merge to Proof-of-Stake (PoS)

One of the most anticipated events in the crypto space is Ethereum’s transition from a proof-of-work (PoW) to a proof-of-stake (PoS) system, known as The Merge. If successful, it could boost ETH’s long-term value and set the stage for another market rally.

3. Institutional Buy-In and Market Stabilization

Despite the downturn, institutional interest in crypto remains. Stablecoins currently make up about 20% of the total crypto market capitalization, indicating that significant capital remains on the sidelines, waiting for the right entry points.

4. Regulatory Developments

Governments worldwide are increasing regulatory scrutiny on the crypto industry, particularly in the wake of Terra’s collapse. While some regulations may hinder short-term growth, clearer frameworks could encourage institutional adoption and long-term stability.

Final Thoughts: A Cleansing Phase for Crypto?

The 2022 crypto crash has been one of the most severe in the industry’s history, shaking investor confidence and exposing structural weaknesses. However, some analysts view it as a necessary correction—a cleansing phase that eliminates overleveraged firms and unsustainable projects.

Historically, crypto has proven resilient, bouncing back from past crashes stronger than before. While predicting the exact timeline of recovery remains difficult, long-term believers see the current bear market as an opportunity to accumulate assets at discounted prices.

For now, investors remain on edge, watching key macroeconomic trends, Ethereum’s Merge, and broader market sentiment to determine whether crypto’s next bull run is on the horizon.

Bitcoin Price Recovery Crypto Bear Market Cryptocurrency Crash DeFi Liquidity Crisis Ethereum merge Federal Reserve Interest Rates Terra Collapse Three Arrows Capital Bankruptcy
Share. Twitter Facebook Telegram Email Bluesky Reddit Copy Link
Previous ArticleIs 2022 the End of Crypto? Experts Weigh in on the Market’s Future
Next Article Bitcoin Surges to $83K Amid Altcoin Rally – Latest Crypto Market Update
Karly Marie
Karly Marie

Related Posts

Press Release

EVAA: TON’s $1.4B DeFi Protocol Becomes Community-Owned DAO With $EVAA Token

October 15, 2025
BNB

Pardon for Binance CEO CZ? Trump’s Move Stuns Markets

October 14, 2025
BNB

BNB Memecoins Crash After CZ’s Tweet—Millions Lost Overnight!

October 14, 2025
– Advertisement –
Trending Posts
Crypto

Musk’s Polymarket Partnership Redefines Predictive Intelligence

June 14, 2025
Bitcoin

Bitcoin Accumulation Strategy Rejected by Coinbase

May 19, 2025
Markets

Pantera Capital Solana Bet Signals Growing Institutional Demand

August 26, 2025

Crypto Junction, founded in 2014, is one of the original and most trusted sources for cryptocurrency news and blockchain insights. We provide accurate, unbiased, and timely coverage of digital assets, market trends, and industry developments.

All content on Crypto Junction is for informational and educational purposes only and should not be considered financial, investment, or legal advice. Cryptocurrency investments are highly volatile and carry risks. Always conduct your own research before making financial decisions.

We're social. Connect with us:

X (Twitter) Telegram
Top Insights

EVAA: TON’s $1.4B DeFi Protocol Becomes Community-Owned DAO With $EVAA Token

October 15, 2025

Pardon for Binance CEO CZ? Trump’s Move Stuns Markets

October 14, 2025

China Tariff News Triggers Crypto Crash — Bitcoin Hits $102K!

October 14, 2025
ABOUT
  • About Us
  • Cookie Policy
  • Editorial Policy
  • Investment Disclaimer
  • Press and Media Kit
  • Terms of Service
  • Affiliate Disclosure
  • Contact Us
  • Crypto Marketing
  • Daily Digest News
Telegram X (Twitter)
  • Altcoin News
  • Bitcoin News
  • Dogecoin News
  • Ethereum News
  • Litecoin News
  • Meme Coin News
  • Solana News
  • XRP News
© 2025 Crypto Junction

Type above and press Enter to search. Press Esc to cancel.

bitcoin
Bitcoin (BTC) $ 111,007.74
ethereum
Ethereum (ETH) $ 3,957.76
tether
Tether (USDT) $ 1.00
bnb
BNB (BNB) $ 1,083.76
xrp
XRP (XRP) $ 2.48
solana
Solana (SOL) $ 191.59
usd-coin
USDC (USDC) $ 1.00
staked-ether
Lido Staked Ether (STETH) $ 3,954.50
tron
TRON (TRX) $ 0.323789
dogecoin
Dogecoin (DOGE) $ 0.199812
cardano
Cardano (ADA) $ 0.6627
wrapped-steth
Wrapped stETH (WSTETH) $ 4,817.36
wrapped-bitcoin
Wrapped Bitcoin (WBTC) $ 110,790.68
wrapped-beacon-eth
Wrapped Beacon ETH (WBETH) $ 4,268.49
figure-heloc
Figure Heloc (FIGR_HELOC) $ 1.03
chainlink
Chainlink (LINK) $ 18.02
ethena-usde
Ethena USDe (USDE) $ 0.999809
wrapped-eeth
Wrapped eETH (WEETH) $ 4,271.59
stellar
Stellar (XLM) $ 0.324376
hyperliquid
Hyperliquid (HYPE) $ 36.33
bitcoin-cash
Bitcoin Cash (BCH) $ 491.47
sui
Sui (SUI) $ 2.57
usds
USDS (USDS) $ 1.00
binance-bridged-usdt-bnb-smart-chain
Binance Bridged USDT (BNB Smart Chain) (BSC-USD) $ 1.00
avalanche-2
Avalanche (AVAX) $ 20.21
weth
WETH (WETH) $ 3,959.12
leo-token
LEO Token (LEO) $ 8.97
coinbase-wrapped-btc
Coinbase Wrapped BTC (CBBTC) $ 110,961.73
hedera-hashgraph
Hedera (HBAR) $ 0.175873
litecoin
Litecoin (LTC) $ 95.59
usdt0
USDT0 (USDT0) $ 1.00
shiba-inu
Shiba Inu (SHIB) $ 0.00001
whitebit
WhiteBIT Coin (WBT) $ 41.85
monero
Monero (XMR) $ 308.48
the-open-network
Toncoin (TON) $ 2.21
mantle
Mantle (MNT) $ 1.71
ethena-staked-usde
Ethena Staked USDe (SUSDE) $ 1.20
crypto-com-chain
Cronos (CRO) $ 0.148376
polkadot
Polkadot (DOT) $ 3.11
dai
Dai (DAI) $ 0.998944
zcash
Zcash (ZEC) $ 275.21
uniswap
Uniswap (UNI) $ 6.46
bittensor
Bittensor (TAO) $ 399.62
memecore
MemeCore (M) $ 2.11
world-liberty-financial
World Liberty Financial (WLFI) $ 0.131226
susds
sUSDS (SUSDS) $ 1.08
okb
OKB (OKB) $ 165.56
aave
Aave (AAVE) $ 227.31
ethena
Ethena (ENA) $ 0.462722
bitget-token
Bitget Token (BGB) $ 4.65
pepe
Pepe (PEPE) $ 0.000007
blackrock-usd-institutional-digital-liquidity-fund
BlackRock USD Institutional Digital Liquidity Fund (BUIDL) $ 1.00
near
NEAR Protocol (NEAR) $ 2.28
jito-staked-sol
Jito Staked SOL (JITOSOL) $ 237.18
paypal-usd
PayPal USD (PYUSD) $ 1.00
usd1-wlfi
USD1 (USD1) $ 1.00
ethereum-classic
Ethereum Classic (ETC) $ 16.16
c1usd
Currency One USD (C1USD) $ 0.997538
binance-peg-weth
Binance-Peg WETH (WETH) $ 3,955.70
ondo-finance
Ondo (ONDO) $ 0.75
aptos
Aptos (APT) $ 3.28
aster-2
Aster (ASTER) $ 1.12
falcon-finance
Falcon USD (USDF) $ 0.994038
tether-gold
Tether Gold (XAUT) $ 4,125.42
jupiter-perpetuals-liquidity-provider-token
Jupiter Perpetuals Liquidity Provider Token (JLP) $ 5.47
polygon-ecosystem-token
POL (ex-MATIC) (POL) $ 0.199225
worldcoin-wld
Worldcoin (WLD) $ 0.920734
htx-dao
HTX DAO (HTX) $ 0.000002
gatechain-token
Gate (GT) $ 15.92
usdtb
USDtb (USDTB) $ 1.00
hash-2
Provenance Blockchain (HASH) $ 0.03604
story-2
Story (IP) $ 5.57
arbitrum
Arbitrum (ARB) $ 0.323635
kucoin-shares
KuCoin (KCS) $ 13.60
rocket-pool-eth
Rocket Pool ETH (RETH) $ 4,529.56
chainopera-ai
ChainOpera AI (COAI) $ 8.58
binance-staked-sol
Binance Staked SOL (BNSOL) $ 206.36
internet-computer
Internet Computer (ICP) $ 3.15
pi-network
Pi Network (PI) $ 0.20443
algorand
Algorand (ALGO) $ 0.188321
cosmos
Cosmos Hub (ATOM) $ 3.29
kelp-dao-restaked-eth
Kelp DAO Restaked ETH (RSETH) $ 4,179.56
vechain
VeChain (VET) $ 0.01776
stakewise-v3-oseth
StakeWise Staked ETH (OSETH) $ 4,177.28
kaspa
Kaspa (KAS) $ 0.053356
pump-fun
Pump.fun (PUMP) $ 0.003978
pudgy-penguins
Pudgy Penguins (PENGU) $ 0.022445
liquid-staked-ethereum
Liquid Staked ETH (LSETH) $ 4,226.33
wbnb
Wrapped BNB (WBNB) $ 1,083.73
sky
Sky (SKY) $ 0.059473
kinetic-staked-hype
Kinetiq Staked HYPE (KHYPE) $ 36.57
flare-networks
Flare (FLR) $ 0.017954
pax-gold
PAX Gold (PAXG) $ 4,137.02
render-token
Render (RENDER) $ 2.58
lombard-staked-btc
Lombard Staked BTC (LBTC) $ 110,839.70
bfusd
BFUSD (BFUSD) $ 1.00
syrupusdc
Syrup USDC (SYRUPUSDC) $ 1.13
renzo-restaked-eth
Renzo Restaked ETH (EZETH) $ 4,200.76
sei-network
Sei (SEI) $ 0.197788
official-trump
Official Trump (TRUMP) $ 6.01