2023: the year of crypto instability
Cryptocurrency has been around for over a decade but has become ubiquitous in the past few years. And it seems that the financial platform reached a breaking point in 2023, which appeared to be crypto's year of highs — and lows.
There are plenty of stories, many of them recent, of people who started with nothing and built themselves into millionaires through crypto investments. For every one of these stories, though, there are also headlines about the other side of crypto, ones that involve fraud, prison and environmental concerns. Here are some of cryptocurrency's ups and downs in 2023.
Sam Bankman-Fried and FTX
Any mention of "the year of cryptocurrency" would be incomplete without Sam Bankman-Fried, the founder of collapsed crypto exchange FTX. Bankman-Fried started his company in 2019 and it eventually grew to become one of the industry's largest players. At its peak, FTX was valued at $32 billion.
The success of the company also made Bankman-Fried extremely wealthy. In September 2022, one month before FTX's collapse, Forbes valued his net worth at $17.2 billion, and he "became a prominent figure in the crypto space while becoming one of the wealthiest people by the age of 30," the outlet noted.
Behind FTX's success, though, was a much darker story, and the company began to fall apart when the SEC began investigating allegations of a widespread Ponzi scheme with Bankman-Fried at the helm. FTX declared bankruptcy in November 2022. Bankman-Fried was eventually charged with financial securities violations, wire fraud and conspiracy. Throughout 2023, additional information came out showing that FTX had conned its investors out of at least $10 billion. Bankman-Fried was found guilty on seven counts in a New York court in November and faces decades in prison, with sentencing scheduled for March 2024. His downfall represents "the deceit fundamental to the crypto market itself," the Los Angeles Times reported.
Environmental issues
Cryptocurrency has long been the bane of environmentalists who express concern over the waste generated by crypto-mining. While all crypto creates environmental hazards, it was the popular choice Bitcoin that made headlines this year.
The controversy first emerged in 2021 when the state of Texas ended up paying Bitcoin's parent company $18 million to keep their computers off during a winter storm so that electricity could be redirected to the power grid. While power plants struggled to stay running, these so-called "Bitcoin mines" were being used to power the homes of thousands of people trading crypto. Despite the harm that came from this power outage, the usage of Bitcoin mines remains common throughout the country. In April of this year, an investigation by The New York Times found "identified 34 such large-scale operations ... in the United States, all putting immense pressure on the power grid and most finding novel ways to profit from doing so."
These mines "can create costs — including higher electricity bills and enormous carbon pollution — for everyone around them," the majority of whom have no stake in Bitcoin. One mine in Dalton, Georgia, is "using nearly as much power as the surrounding 97,000 households," the Times found. The largest Bitcoin mine in the U.S. is located in Rockdale, Texas, and "uses about the same amount of electricity as the nearest 300,000 homes," the Times reported. So it seems that the industry is just getting larger — with taxpayers in Texas and elsewhere stuck with the bill.
Stocks and lobbying
Despite many negative stories, 2023 wasn't all bad in the crypto world. Many have argued that crypto is still a worthwhile investment, and there is some data to support this despite its volatility.
Numerous crypto-related stocks rose at the beginning of December as part of a "new surge of momentum fueled by U.S. interest rate cut expectations and traders betting that American regulators will soon approve exchange-traded spot bitcoin funds," Reuters reported. Bitcoin's stock passed $42,000 per share for a short time, representing a 20-month high. The currency has seemingly "[cast] off the gloom that had settled over crypto markets following the collapse of FTX and other crypto-business failures," Reuters added.
The outlet additionally reported that the crypto industry is "on track to hit a new record for federal lobbying spending." The major crypto companies spent $18.96 million on lobbying in the first three quarters of 2023, according to Reuters, compared with $16.1 million during the same period in 2022. So while cryptocurrency as a whole remains controversial, its financial peaks and valleys remain fluid.
