From Collapse to Comeback: How Crypto Rebounded After Terra, FTX, and Regulatory Pressure

Crypto's journey from crisis to revival has been dramatic. The collapse of Terra in 2022, triggered by the failure of its algorithmic stablecoin UST and native token LUNA, erased over $40 billion in value. As redemptions spiraled, the system flooded the market with LUNA, crashing its price and confidence. This catastrophe sparked a chain reaction: the fall of crypto hedge fund Three Arrows Capital, the bankruptcies of Voyager, BlockFi, and Celsius, and intensified scrutiny from U.S. regulators.

FTX's implosion in late 2022 further shook the industry. Sam Bankman-Fried was exposed for misusing customer funds, leading to his arrest and FTX’s bankruptcy. In response, the SEC—led by Gary Gensler—launched a wave of lawsuits, targeting giants like Coinbase and Kraken, ushering in what critics called “regulation by enforcement.”

By early 2023, crypto faced banking isolation as Signature, Silvergate, and SVB collapsed. Accusations arose that the Biden administration sought to “debank” the sector. But sentiment shifted when BlackRock filed for a spot Bitcoin ETF in June 2023. A legal win by Grayscale forced the SEC’s hand, leading to the approval of spot Bitcoin ETFs in January 2024—the most successful ETF launches ever.

With Trump’s pro-crypto stance gaining ground, the SEC also approved Ether ETFs. Congress passed the GENIUS Act to regulate stablecoins, and the Clarity Act is likely next. Trump’s victory in 2024 accelerated the industry’s rebound: Tornado Cash was unsanctioned, lawsuits dropped, and Ross Ulbricht was released. States like Texas and Arizona are even building Bitcoin reserves.

Bitcoin now trades near $120K, and total crypto market cap has soared past $4 trillion. With Coinbase stock at record highs and Tether and Circle thriving, crypto is not just back—it’s booming.