Billions of Funds Lost in Crypto Market in 2022

    Tanya Sharma
    Tanya Sharma
    Published on January 10, 2023 4:19 PM
    According to blockchain audit firm CertiK, 3.7 billion was lost to crypto scams, hacks, and attacks in 2022.
    Billions of Funds Lost in Crypto Market in 2022
    Source: Unsplash

    According to Immunefi, Web3's biggest bug bounty platform, and software firm, the crypto sector will lose approximately $3,948,856,037 in 2022.

    According to sources, the main cause of the losses is hacking, which accounts for around 95.6% of the total. Meanwhile, only 4.4% could be linked to other problems, which included fraud, scams, and rug pull.

    In particular, 2022 has seen a loss of about $3,773,906,837 in 134 separate incidents. When comparing the losses in 2021 and 2022, this year's loss has increased by 56.2%.

    Significantly, the data indicates that the most targeted industry was decentralized finance (DeFi), which lost over 80.5%, while centralized finance (CeFi) lost only 19.5%:

    “DeFi has suffered $3,180,023,103 in total losses in 2022, across 155 incidents. This number represents a 56.2% increase compared to 2021, when DeFi lost $2,036,015,896, in 107 incidents.”

    Furthermore, the site stated that BNB Chain and Ethereum were the most targeted chains in 2022, "representing more than half of the chain attacks in 2022," accounting for 63.3%.

    Surprisingly, of the two chains, the BNB Chain has outperformed Ethereum:

    “BNB Chain surpassed Ethereum and became the most targeted chain in 2022, with 65 incidents, representing 36.1%, while Ethereum witnessed 49 incidents, representing 27.2%.”

    Furthermore, Immunefi provided information about the losers' recoveries, however, it was limited. A total of $204,157,000 has been recovered over 12 incidents, accounting for only 5.2% of total losses in 2022.

    North Korea's Lazarus Group stole $625 million from Axie Infinity's Ronin Network in April, making it one of the year's most prominent cyberattacks. This was in response to the almost $325 million attack on the cross-chain service Wormhole in February.

    According to Ari Redbord, TRM Labs' head of legal and government affairs, North Korea alone was responsible for approximately $1 billion in stolen assets.

    Related Read: DAVOS: Why Cryptocurrency Need a “ Value for the Internet”

    Crypto Market Tumbling Event

    Chainalysis, a blockchain analysis firm, said in October that 2022 would be "the biggest year ever" in terms of the number of crypto projects attacked and drained of funds. It sure felt like it.

    The apparent lack of security this year has made an already difficult bear market even more difficult for many.

    Also Read: The Most Pervasive Cryptocurrency Buzzwords

    FTX Collapse and Hack

    The largest crypto event of 2022—and possibly the biggest news story—was the spectacular collapse of the super-popular digital asset exchange FTX, which lost billions of dollars in funds.

    It declared Chapter 11 bankruptcy on November 12, but that wasn't the end of its problems: the celebrity-endorsed exchange was then targeted by an unknown attack.

    Several wallets purportedly belonging to FTX were emptied of around $640 million in tokens. The monies were subsequently transferred to several exchanges and transformed into various cryptocurrencies.

    It's still unclear who took the assets. FTX's new management's attorney, James Bromley, stated at the exchange's first court hearing that a "significant amount" of the exchange's assets are missing or had been stolen.

    Terra Luna Collapse

    The Luna crypto meltdown was caused by its connection to TerraUSD (UST), the Terra network's algorithmic stablecoin.

    Over $2 billion in UST was unstacked (removed from the Anchor Protocol) on May 7, and hundreds of millions of dollars were swiftly liquidated. It's unclear whether this was a reaction to higher interest rates or an intentional attack on the Terra blockchain. The massive sell-offs reduced the price of UST from $1 to $0.91. As a result, merchants began exchanging 90 cents of UST for $1 of Luna.

    After a considerable volume of UST was offloaded, the stablecoin began to debug. Additional people sold off their UST in a panic, resulting in the minting of more Luna and an increase in the circulating amount of Luna.

    Following the crash, cryptocurrency exchanges began to delist Luna and UST pairings. Long story short, Luna was abandoned since it had lost its value.

    Binance Smart Chain Hack

    On October 6, hackers attacked a blockchain affiliated with the world's largest crypto exchange, stealing $566 million in BNB.

    The exploit targeted the BSC Token Hub cross-chain bridge. Hackers created tokens out of thin air by forging fake withdrawal proofs. However, no Binance or blockchain users were harmed in this attack.

    Despite a large number of stolen tokens, the thieves were unable to take them all—Binance CEO Changpeng Zhao stated that they were able to prevent the hacker from stealing 80% to 90% of the targeted assets.

    This is because BSC chain validators halted the network after the attack—however, hackers were able to move about $100 million in money to other chains.

    Cryptocurrency FAQs

    What is cryptocurrency?

    A digital currency, or cryptocurrency, is an alternative payment method developed utilizing encryption methods. By utilizing encryption technology, cryptocurrencies may act as both a medium of exchange and a virtual accounting system. You need a cryptocurrency wallet to utilize cryptocurrencies.

    Why is cryptocurrency falling off so much?

    Due to rising interest rates and a general market slump where investors have shied away from riskier assets, the crypto markets have been hit hard by many crises throughout 2022, in addition to funding concerns.

    Do millionaires invest in crypto?

    This implies that there are dangers associated with investing in cryptocurrencies, and as a result, the market requires ongoing monitoring. Millionaires continue to invest in cryptocurrencies despite these drawbacks since the advantages greatly outweigh them.