Review of Crypto World Disasters: From Mt. Gox to LUNA/FTX

Investors who have experienced multiple disasters in the crypto world can be considered battle-hardened veterans. As the date of 519 approaches, let us review several significant events from past years and remind everyone to invest with caution.

Mt. Gox Incident

In February 2014, the then largest Bitcoin exchange Mt. Gox was hacked, resulting in a loss of approximately 850,000 Bitcoins, accounting for 7% of the global total. This event led to an 80% crash in Bitcoin prices, triggering a trust crisis in the crypto world.

Interestingly, due to the surge in Bitcoin prices over the past decade, the remaining Bitcoins after the Mt. Gox liquidation are actually enough to cover all the losses of the original creditors. Recent reports have indicated that Mt. Gox is preparing to distribute approximately 142,000 Bitcoins and 143,000 Bitcoins in cash to creditors, with a total value exceeding $9 billion.

94 Incident

In 2017, regulatory authorities in mainland China took strict measures against ICO projects. At that time, various ICO projects emerged like mushrooms after rain, and even square dance aunties started researching ICOs, leading to chaos in the market.

On September 4th, seven ministries jointly issued a notice classifying ICOs as illegal fundraising activities. This move led to a 32% drop in Bitcoin and a staggering 57.3% drop in Litecoin. Many exchanges were forced to move overseas, project teams rushed to refund coins, and panic spread throughout the crypto world.

However, this blow was only a short-term impact. Three months later, the price of Bitcoin reached a historical high of $20,000, an increase of 6 times. Some exchanges returned to the Chinese market through coin-to-coin trading and over-the-counter fiat trading, among which a certain trading platform took this opportunity to achieve a comeback and became an industry giant.

312 Incident

On March 12, 2020, affected by the global pandemic, Bitcoin plummeted from $7,966 to $3,782, with a drop of over 50% in two days. Many investors originally viewed Bitcoin as a safe-haven asset, but this crash broke that perception.

However, this crash also provided investors with an excellent opportunity to buy the dip. Just four years later, the price of Bitcoin, which was over 3000 dollars at the time, had increased more than twenty-fold.

519 Incident

On May 19, 2021, Bitcoin dropped from $44,000 to $29,000, a decline of 34%. This crash was triggered by a series of measures from regulatory authorities in mainland China, including the shutdown of mining farms and the export of mining machines.

However, the market quickly rebounded. Many short sellers thought they had found an opportunity, but unexpectedly, Bitcoin suddenly reversed and broke through new highs, reaching $67,000. This wave of market action almost wiped out contract players, and the remaining short sellers were also severely hit.

LUNA/FTX Explosion Incident

In 2022, LUNA and FTX collapsed one after another, triggering a crisis of confidence in the crypto world and leading the market into a deep bear phase.

LUNA is an algorithmic stablecoin project that once reached a market capitalization of 40 billion USD. However, when a large number of holders began to sell UST, the price of LUNA plummeted, ultimately leading to the collapse of the entire ecosystem.

As the second largest exchange in the market at the time, FTX received support from numerous well-known investment institutions, with a valuation reaching 32 billion USD. However, in November 2022, FTX suddenly collapsed, with internal management chaos and the arbitrary misuse of customer funds also being exposed.

These two incidents dealt a serious blow to the market, with the price of Bitcoin dropping from $60,000 at the beginning of the year to $15,000 at the end of the year, a decline of 75%.

Summary

Looking back at these tragedies, we can find that:

1. Events that are truly related to cryptocurrency technology (such as the Mt. Gox hack and the LUNA/FTX collapse) often lead to prolonged market downturns, requiring 1-2 years to recover.

2. Events affected by policy (such as 94 and 519) usually only cause short-term fluctuations, and the market can quickly recover.

3. External factors like the one similar to 312 that lead to a crash often present great opportunities for bottom fishing.

For investors, it is important to pay attention to the development of blockchain technology itself and the practical application scenarios. Only truly valuable projects can gain market recognition in the long term, while those projects supported by hype and concepts will ultimately be eliminated.

Regardless, the volatility of the crypto market remains high, and investors must act cautiously and manage risks effectively.