Context of Crypto Collapses

The crypto world isn’t for the faint-hearted. It’s been a rollercoaster ride with peaks and valleys that would make even the most seasoned investor’s head spin. Among the most notable moments, the FTX collapse stood out, but is it truly the worst of this chaotic year? Spoiler alert: not even close.

The Gravitational Pull of Losses

Chainalysis recently dissected the losses within the crypto universe, focusing on the FTX fallout compared to previous meltdowns in 2022. Their findings reveal that the true horror show occurred earlier in the year.

• Terra USD (UST) started the downward trend with a *whopping* $20.5 billion in weekly realized losses after its depegging in May.
• By June, the triple whammy from Three Arrows Capital and Celsius hit even harder, peaking at $33 billion.

In stark contrast, FTX’s calamity peaked at a comparatively modest $9 billion in losses during the week of November 7. Lesson learned? It’s all about perspective—FTX was just the cherry on top of a sour cake.

The Analysis Behind the Numbers

So how did they arrive at these rather bleak statistics? Chainalysis smartly assessed realized losses by evaluating personal wallets—essentially tracking how assets shuffled around like a game of musical chairs. However, there’s a catch! They counted any movement as a sale, which could inflate the losses a tad. They warned against treating the numbers like gospel, especially with frozen user funds on exchanges.

“These numbers represent an upper bound for realized gains of a given wallet.”

Moving Beyond Realized Losses

Switching gears, it’s crucial to recognize that not all losses are visible. The platform CryptoQuant chimed in with data showing **unrealized losses** for Bitcoin, which hit a stunning max of -31.7% post-FTX, eclipsing earlier dips seen during the Terra and 3AC collapses. What this tells us is that *paper losses*, though not realized, are still a bitter pill to swallow.

The Holding Pattern of Investors

The impact of these losses extends to long-term holders, with some enduring an average unrealized loss of about -33%. That’s painful enough to make any crypto enthusiast question their sanity—sort of like knowing you left the milk out overnight in the fridge and then deciding to take a sip anyway. Historical data reveals that this pain is comparable to the dreadful lows of the 2018 bear market, which averaged -36% in unrealized losses.

Conclusion: A Lesson in Resilience

In the ever-turbulent sea of cryptocurrency, understanding the difference between realized and unrealized losses is crucial. Whether you’re holding on for dear life or contemplating a mad dash for the exit, remember: this too shall pass. The future might just be brighter, assuming you survive the current storm!