Crypto's volatility makes for spectacular booms — and equally spectacular blow-ups. Some collapses were hacks, some were reckless bets dressed up as innovation, and some were outright fraud. Here are the most consequential, and the patterns that keep repeating.
Mt. Gox (2014) — the exchange that lost the coins
At its height, Mt. Gox handled the majority of global Bitcoin trading. In 2014 it halted withdrawals and revealed that hundreds of thousands of bitcoins — worth hundreds of millions at the time, and vastly more later — had gone missing, attributed largely to a prolonged hack. The exchange filed for bankruptcy, and creditors spent the better part of a decade waiting for partial recovery. Lesson one of crypto: "not your keys, not your coins."
Terra / LUNA (2022) — the stablecoin that wasn't stable
TerraUSD was an algorithmic stablecoin meant to hold a $1 peg through a mechanism tied to its sister token, LUNA, rather than real cash reserves. When confidence cracked in May 2022, the peg broke and the mechanism spiraled: as the stablecoin fell, LUNA was minted in enormous quantities, hyperinflating its supply toward zero. Roughly tens of billions in value evaporated in days, taking many other projects down with it.
Celsius (2022) — "your bank, but crypto"
Celsius marketed high yields on deposited crypto, attracting billions from retail users. But high promised yields require risky deployment of those funds, and when markets turned and withdrawals surged, it froze customer accounts and filed for bankruptcy. The episode showed how "earn interest on your crypto" products can carry hidden, concentrated risk that users never see until the exits close.
FTX (2022) — from $32B to bankruptcy
FTX was one of the largest crypto exchanges, valued in the tens of billions. In late 2022 it collapsed within days amid revelations about the misuse of customer funds tied to an affiliated trading firm. The bankruptcy left a massive hole in customer balances. Its founder was later convicted of fraud and sentenced to a long prison term. It became the defining "trust the platform" cautionary tale of the era.
A rug pull is when a token's creators hype it, attract buyers, then dump their holdings or drain the liquidity pool, collapsing the price to near zero while ordinary holders can't sell. It's a pump-and-dump with the exits welded shut — covered in what is a meme coin?
The red flags that keep recurring
- "Stable" or "guaranteed" yields that are far above the market — someone is taking hidden risk.
- Opaque operations — you can't see where the money actually goes.
- Custody risk — assets held by a platform can be lost, frozen, or misused.
- Concentration — a few wallets or one affiliated firm holding the keys.
- Withdrawal friction — when getting your money out gets "temporarily" hard.
The takeaway
Crypto's underlying tech is real, but the blow-ups share old-fashioned causes: leverage, opacity, custody risk, and promises that defy math. If a yield looks too good, assume risk is hiding somewhere — and remember that a token soaring on pure hype is the same greater-fool game you can feel in Tap Surge.
General education, not financial advice. Crypto is highly volatile and risky.