The past two months of 2022 have been a tumultuous time for crypto enthusiasts. As the Terra Luna UST collapse was unfolding, I asked myself, “Would this create a domino effect, resulting in the collapse of major players in the crypto space?” What transpired was worse than what I could possibly imagine.

3 Arrows Capital (3AC) held a leveraged position in Luna and UST and saw $200 million of capital evaporate in less than 36 hours. The leverage was brought about by lending from BitMex, FTX, and Deribit. Soon after, BitMex, FTX, and Deribit were forced to liquidate 3AC’s leveraged positions after they could not make their margin calls. These liquidations resulted in extended selling pressure in the crypto market, resulting in further margin calls.

After the dust settled (or has it?), Vauld, Babel Finance, CoinFlex, CoinDCX, Celsius and Voyager had all halted withdrawals from their exchanges. Hedge funds like Uprise lost millions of capital from their books.

It has become obvious that the inherent transparency that is built into blockchain technology was successfully obscured by centralized institutions. Highly leveraged positions grew outside of the purview of blockchain analysts. If anyone was aware of this situation, they were either silent or their warning cries were muted.

It is important to learn the lessons that are being taught by the failures of these major players.