In this article, I will cover how the most dramatic events in crypto history which involve the collapse of major coins has impacted the globe. The FTX collapse and TerraUSD collapse alongside many other incidents have led to significant omni-directional impacts on cryptocurrency.
Every collapse teaches us important lessons related to safety, market hazards, risk management, clarity, and vulnerabilities within the digital asset ecosystem.
Key Points & Top Crypto Coin Collapses That Shook the Industry List
| Crypto Project | Key Point |
|---|---|
| TerraUSD (UST) | Algorithmic stablecoin lost its peg, wiping out billions in value overnight. |
| Squid Game Token (SQUID) | Rug pull scam where creators vanished with investor funds after price surged. |
| SafeMoon | Faced pump-and-dump accusations and declining credibility amid leadership issues. |
| Ethereum’s DAO | Early DeFi project hacked due to a smart contract flaw, leading to Ethereum split. |
| FTX Collapse | Major crypto exchange went bankrupt after alleged fraud and mismanagement. |
| Mantra (OM) | Promised DeFi services but failed to gain traction, facing trust issues. |
| SpaceBIT | Marketed as the first space-based crypto bank but vanished after initial hype. |
| GetGems | Telegram-based NFT project that died after funding failed to sustain interest. |
| OneCoin | Massive Ponzi scheme disguised as a cryptocurrency, defrauding billions globally. |
| CoinDash | Lost millions during ICO due to a website hack that redirected investor funds. |
10 Top Crypto Coin Collapses That Shook the Industry
1.TerraUSD (UST)
TerraUSD UST, like many automatic-steered currency (stablecoin) systems, was pegged to a dollar with another sister-token (LUNA) and was marketed at an aggressive scale.
In May 2022, a consequence of large sell-off triggered a spiral effect from which it could not recover; UST lost its peg, and LUNA began inflating at breakneck speeds attempting to regain footing.
Algosystematic cryptocurrencies are now being discussed with a combative touch as more than 40 billion dollars were stripped away within days of this event, incurring devastating loss for investors and severely shaking confidence for steadied currencies.
The system is now facing heavy scrutiny, being labeled as one of the most devastating infrastructural failures for crypto currency systems in history.
| Feature | Details |
|---|---|
| Launch Date | January 2018 |
| Type | Algorithmic stablecoin |
| Pegged To | US Dollar (1 UST = 1 USD) |
| Cause of Collapse | Failure to maintain peg due to massive sell-offs and panic in the market. |
| Lost Market Value | Over $40 billion |
| Key Trigger | Instability in the algorithmic mechanism that failed to stabilize UST. |
| Impact | Led to a crash in both UST and sister token LUNA, causing widespread panic. |
| Post-Collapse Action | Regulatory scrutiny and efforts to create new mechanisms for stablecoin management. |
| Significance | One of the largest and most devastating crypto collapses, reshaping the stablecoin landscape. |
2.Squid Game Token (SQUID)
The play-to-earn token of Squid Game, The Squid Game Token (SQUID), took advantage of the viral success of Netflix’s show and implemented a Ponzi scheme as a marketing strategy to capture investors.
The token was launched back in 2021 and its value surged over 75,000%. Contrary to popular belief, there was no utilize option for the token which meant investors could not sell.
The blockchain based project was a testament to ponzi schemes, the unknown founders left the scene with approximately 3.3 Michele in dollars.
SQUID’s price dropped exponentially within minutes, highlighting the need for extensive research beyond the meme coins. The world of cryptocurrency came up with an slogan: at your own risk.
| Feature | Details |
|---|---|
| Launch and Concept | Inspired by Netflix’s “Squid Game,” it promised a play-to-earn gaming experience. |
| Rapid Price Surge | The token’s value skyrocketed to over $2,800 before crashing to nearly $0 within minutes. |
| Collapse Cause | A classic rug pull scam where developers abandoned the project, taking approximately $3.3 million. |
| Red Flags | – Anti-dumping mechanism prevented users from selling tokens. <br> – False claims of partnerships with Netflix and Microsoft. |
| Impact on Investors | Thousands of investors lost their funds, unable to sell their tokens due to scam mechanisms. |
3.SafeMoon
SafeMoon was released in 2021 amidst viral hype, advertising passive rewards for holders while imposing seller penalties to curb dumping.
It gained traction among social media influencers as well as retail investors, achieving eye-watering valuations. Concerns regarding the lack of utility, overly complex tokenomics and centralized control were raised.
Escalating accusations of insider manipulation, poor marketing transparency, and misleading advertising resulted in dwindling trust and value.
By 2022, SafeMoon had shed most of its market cap, suffering lawsuits and investigations that further damaged its reputation. Where once this currency was considered a hallmark of DeFi frenzy, it is now regarded as a poster child of reckless speculative investing.
| Feature | Details |
|---|---|
| Launch and Popularity | Launched in 2021, gained massive attention due to celebrity endorsements and social media hype. |
| Rapid Price Surge | Experienced a meteoric rise, increasing over 23,000% within weeks of its launch. |
| Collapse Cause | Accused of being a pump-and-dump scheme; founders faced fraud allegations and lawsuits. |
| Impact on Investors | Investors suffered significant losses as the token’s value plummeted to nearly zero. |
| Controversies | Linked to misleading claims, celebrity promotions, and legal challenges against its creators. |
4.Ethereum’s DAO
In 2016, there was an attempt to launch an Ethereum-based project called The DAO (Decentralized Autonomous Organization), aimed to serve as a self-governing venture capital fund, controlled by token owners.
The was extremely innovative for its time. Unfortunately, a flaw in its smart contract allowed a malicious actor to hijack over $50 million, which was roughly one-third of the total funds.
The Ethereum community’s response was radical: they initiated a hard fork to erase the hack which eventually resulted in the birth of Ethereum Classic.
Alongside the more impactful issues such as the vulnerability of smart contracts and their security governance, this incident also ignited discussions on the effects of blockchain immutability and exploitation.
| Feature | Details |
|---|---|
| Launch and Concept | Introduced in 2016 as a decentralized autonomous organization (DAO) for venture capital funding. |
| Funds Raised | Raised over $150 million in Ether during its crowdfunding campaign, making it one of the largest at the time. |
| Collapse Cause | Exploited due to a vulnerability in its smart contract, leading to the loss of 3.6 million Ether (valued at $60 million then). |
| Impact on Ethereum | Resulted in a controversial hard fork, splitting Ethereum into Ethereum (ETH) and Ethereum Classic (ETC). |
| Lessons Learned | Highlighted the importance of rigorous smart contract security and governance in blockchain projects. |
5.FTX Collapse
FTX was once among the proponents of cryptocurrency being regarded as one of the largest and most trusted exchanges, before collapsing in late 2022 under allegations of fraud.
Sam Bankman-Fried, the owner of the exchange, also came under scrutiny for allegedly defrauding customers by using their money to manipulate markets and invest in his own trading firm, Alameda Research.
Bankrupting FTX company led to liquidity issues which destroyed billions of dollars worth investor funds.
This set a precedent for the calamity, as it hurt trust in investors across the cryptocurrency industry while also introducing tighter regulatory policies. This serves as one of the most notable disasters in the realm of cryptocurrency and its market.
| Feature | Details |
|---|---|
| Cause of Collapse | Mismanagement of funds and close ties with Alameda Research, leading to liquidity issues and bankruptcy. |
| Impact on Investors | Billions of dollars lost, with many users unable to recover their funds. |
| Market Ripple Effect | Shook the crypto industry, causing widespread distrust and regulatory scrutiny. |
| Legal Consequences | CEO Sam Bankman-Fried faced criminal charges and was sentenced to 25 years in prison. |
| Lessons Learned | Highlighted the need for transparency, proper fund management, and stronger regulations in the crypto space |
6.Mantra (OM)
Mantra (OM) sought to establish a community-powered platform offering governance, staking, and yield farming, but it faltered as a DeFi project.
It ran into issues with insufficient market adoption, a lack of transparency, and other hurdles. Centralization, failure to deliver real benefits, and a lack of trust within the community made the situation worse.
In the end, Mantra’s OM token lost most of its value and the project was never able to gain any market adoption. The Mantra saga exposed the dangers of flimsy DeFi projects built without a sound foundation, contributing to the decline of market sentiment.
| Feature | Details |
|---|---|
| Collapse Cause | Lost over 90% of its value in a single day due to forced liquidations and low liquidity2. |
| Impact on Investors | Wiped out billions in market cap, leaving investors with significant losses2. |
| Controversies | Allegations of insider dumping, price manipulation, and flawed tokenomics2. |
| Lessons Learned | Highlighted risks in DeFi projects, including governance issues and token supply centralization |
7.SpaceBIT
SpaceBIT claimed to be the first cryptocurrency bank in space, claiming they would change the way space exploration was funded using blockchain technology. The initial combination of crypto and space technology captured attention, but the project failed to deliver.
There was a period of hype for SpaceBIT, but their development came to a standstill. It became obvious that the goals were unrealistic. There was very little transparency about the project, and the lack of updates further obfuscated SpaceBIT’s status.
All of this contributed to the loss of interest from investors who, at one point, heavily supported SpaceBIT. The downfall of SpaceBIT is often cited as a warning for those pursuing reckless ideas which had barely any support or execution plans.
| Feature | Details |
|---|---|
| Launch and Concept | Introduced in 2014 as the first decentralized space exploration platform using blockchain technology. |
| Collapse Cause | Shelved in 2015 after the team shifted focus to other projects, leading to abandonment. |
| Impact on Investors | Investors faced losses as the project failed to deliver on its ambitious promises. |
| Lessons Learned | Highlighted the risks of overambitious projects without clear execution plans or sustained funding. |
8.GetGems
GetGems was an NFT project on Telegram where users could create and trade unique digital gems. It generated some buzz, but quickly hit a wall with no clear path toward building a user base. As GetGems continually failed to deliver on promises, investor interest began to dry up.
Its eventual decline was marked by opaque decision making, virtually no communication, and the inability to grow beyond its Telegram community.
GetGens reminds us of the fickleness of NFT projects lacking clearly defined value propositions plagued by excessive hype.
| Feature | Details |
|---|---|
| Launch and Concept | Introduced as a messaging app integrated with cryptocurrency rewards for users. |
| Collapse Cause | Struggled due to lack of funding and limited adoption, leading to its near abandonment. |
| Impact on Investors | Investors faced losses as the project failed to gain traction and deliver on its promises. |
| Lessons Learned | Highlighted the importance of sustainable funding and user adoption in crypto-based projects. |
9.OneCoin
In 2014, Ruja Ignatova touted OneCoin as a cryptocurrency that could change the investment landscape. In reality, it was a scam that ripped off billions of dollars from unsuspecting investors through a ponzi scheme.
OneCoin was marketed globally and claimed its marketing strategies yielded a blockchain, existing market presence, and legitimacy.
Ignatova vanished in 2017, after the scheme fell apart, leaving millions of investors stranded with nothing. This incident stands as one of the worst scams in the history of cryptocurrency and further emphasizes the need of careful consideration and regulatory structures before embarking on cryptocurrency ventures.
| Feature | Details |
|---|---|
| Launch and Concept | Founded in 2014 by Ruja Ignatova, marketed as a “Bitcoin killer” with promises of high returns. |
| Collapse Cause | Exposed as a Ponzi scheme with no real blockchain; relied on multi-level marketing to recruit investors. |
| Impact on Investors | Defrauded investors of an estimated $4 billion, making it one of the largest crypto scams in history. |
| Legal Consequences | Ruja Ignatova, known as the “Cryptoqueen,” disappeared in 2017 and remains on the FBI’s Most Wanted list. |
| Lessons Learned | Highlighted the importance of due diligence and regulatory oversight in the cryptocurrency market. |
10.CoinDash
The promising crypto portfolio management platform CoinDash launched an ICO in 2017. It was during the ICO that hackers broke into the site, diverting over 7 million dollars meant for investments into a personal wallet.
Although the company tried to recover from these losses, they suffered damage to their reputation. CoinDash’s downfall brought to light the risks associated with the ICO model while also questioning the existing infrastructure of security policies for fundraising in crypto.
This breach demonstrated the critical need to protect funds and maintain open access to financial practices and information, which changed the standards for security in cryptocurrency investment.
| Feature | Details |
|---|---|
| Incident | CoinDash suffered a major hack during its Initial Coin Offering (ICO) in July 2017. |
| Financial Loss | Approximately 43,500 ETH (valued at $7.5 million at the time) was stolen due to a website compromise. |
| Impact on Operations | The ICO was halted immediately, and the incident eroded user trust in the platform. |
| Recovery Efforts | CoinDash reimbursed affected users over time using its profits and resumed operations with improved security. |
| Lessons Learned | Highlighted the importance of robust website security and transparency during ICOs. |
Conclusion
In summary, The fall of key cryptocurrencies such as TerraUSD, FTX, and OneCoin has exposed the weaknesses within the system. These cases emphasize the necessity of having safety, transparency, and sound fundamentals for any crypto endeavors.
Moving forward, control from authorities combined with cautious investment will be essential to safeguarding the market from future instabilities while ensuring the soundness of digital currencies.
