Since the beginning of 2025, the cryptocurrency market has remained sluggish. Despite a slew of positive policy signals from the Trump administration, the market has plunged into a “crisis of confidence”: Bybit suffered the largest hack in its history, capital continues to exit Bitcoin spot ETFs, the anticipated Fed rate cuts did not materialize, and fears of a global trade war sparked by new tariffs are mounting. Under these intertwined bearish factors, the crypto industry is on edge, with panic sentiment spreading rapidly.

According to TradingView data, BTC dropped from a high of $109,600 at the start of the year to a low of $74,500, a 32% decline. The altcoin market has fared even worse, with most tokens losing 80–90% of their value. The total crypto market cap has shrunk from its $3.69 trillion peak at the start of the year to the current $2.62 trillion, evaporating $1.07 trillion in value.

As market uncertainty intensifies, traditional safe-haven asset gold has repeatedly hit new highs. In stark contrast, crypto assets appear to be abandoned once again. Yet, when we look back at the history of cryptocurrency, severe crashes are nothing new. Time and again, the market has demonstrated a remarkable capacity for rebirth following each “darkest hour.”

This article reviews some of the most significant crypto market crashes over the past decade, including the Mt. Gox incident, the March 12 (312) crash, the Terra/Luna collapse, and the FTX debacle. It provides an in-depth analysis of the causes, potential impacts, and aftermath of each market upheaval, offering valuable insights for users.

A Review of Major Crash Events

Looking back over more than a decade of crypto market evolution, deep corrections have occurred almost every year, whether due to overheated markets correcting themselves or black swan events causing sudden collapses. But as BitMEX founder Arthur Hayes once said, “Every crash is the market purging itself — true value will ultimately rise to the surface.”

(Source: TradingView)

Mt. Gox Hack

In February 2024, the cryptocurrency industry experienced the most severe hacking incident in its history. At the time, Mt. Gox—the world’s largest Bitcoin exchange—was breached, resulting in the theft of nearly 850,000 BTC, approximately 7% of the total circulating supply, valued at around $473 million at the time. This catastrophic event led directly to Mt. Gox declaring bankruptcy, leaving hundreds of thousands of users with nothing. Bitcoin’s price plummeted 48% within just two weeks, delivering a devastating blow to market confidence and plunging the entire industry into a prolonged 18-month crypto winter.

This “largest bankruptcy in crypto history,” which has unfolded over more than a decade, left a profound impact on the industry:

• At the industry level, it spurred widespread adoption of enhanced security measures such as offline cold wallet storage and multi-signature technology.
• For everyday investors, it served as a stark warning to be cautious when choosing exchanges and to diversify asset holdings to mitigate potential risks.

The 9/4 Event: China’s ICO Ban

On September 4, 2017, seven major Chinese government agencies jointly issued the Announcement on Preventing Risks Related to Token Issuance Financing, banning all Initial Coin Offering (ICO) activities within China. ICOs were officially labeled as unauthorized and illegal public fundraising. Additionally, all domestic cryptocurrency exchanges were ordered to shut down, and financial institutions were prohibited from offering custodial or clearing services for crypto transactions. The market reacted with a sharp plunge—BTC dropped 32% in a single day, many altcoins became virtually worthless, and market liquidity plummeted.

(Source: pbc.gov.cn)

The 9/4 ban caused immediate and severe damage to the crypto market and triggered widespread industry repercussions, including:

• Reshaping of exchange dynamics: Major exchanges like Huobi and OKCoin (later rebranded as OKEx) moved operations overseas. Binance, in contrast, seized the opportunity to rise and eventually became one of the world’s largest exchanges.
• Rise of OTC trading: With fiat gateways severed, investors turned to P2P over-the-counter (OTC) and crypto-to-crypto trading.
• Surge in STOs: Following the ban on ICOs, Security Token Offerings (STOs), with their emphasis on regulatory compliance, emerged as a new trend.

Despite the regulatory crackdown that curbed ICO speculation, the market’s upward momentum remained strong. Bitcoin’s price skyrocketed from a low of $3,000 to a peak of $19,600 in just three months—a staggering 5.53x increase.

The 3/12 Event: Pandemic-Induced Liquidity Crisis

From March 12 to 13, 2020, the cryptocurrency market suffered one of its most dramatic single-day crashes, known as “Black Thursday” or the “3/12 Event.” During this period, Bitcoin’s price plunged from $8,000 to $3,800—an over 52% drop. At the same time, more than $3 billion worth of positions were liquidated, affecting over 100,000 traders and setting a record at the time.

The immediate trigger for this crash was the global financial panic driven by the COVID-19 pandemic. U.S. stock markets hit circuit breakers multiple times, commodities like oil were battered, and investors worldwide dumped risk assets—including stocks and cryptocurrencies—to secure cash. Amid this panic selling, the extensive use of high-leverage trading (often 10x or more) by crypto investors triggered a cascade of forced liquidations. During periods of extreme volatility, exchanges like Binance and Coinbase experienced outages due to overwhelming traffic, preventing users from topping up or exiting positions, which exacerbated the downturn in a vicious cycle.

Moreover, the price collapse disrupted on-chain ecosystems, leading to mass liquidation of collateralized positions and fueling doubts about the stability of the DeFi system.

This extreme market stress test ultimately ended with BitMEX “pulling the plug”—taking their platform offline. However, it thoroughly exposed the flaws in market liquidity, high-leverage trading, and DeFi design. The aftermath prompted comprehensive improvements in risk control and product design across the industry, such as:

• Infrastructure Enhancements: Exchanges were driven to strengthen system stability to avoid outages during extreme market volatility. Additionally, more on-chain tools emerged to monitor large liquidation risks in real time.
• DeFi Liquidation Mechanisms: Protocols like MakerDAO adopted more robust collateral strategies, increasing collateralization ratios from 150% to 200% to reduce the risk of liquidation cascades.
• Investor Behavior: Users gravitated toward more stable investments in spot markets or used lower leverage, and began utilizing options for hedging, spurring growth in the crypto options market.

In short, the 3/12 liquidity crisis was a rare moment of synchronized panic in the mainstream financial markets. Its brutal intensity awakened many crypto participants to the ticking time bomb that is high leverage. Paradoxically, this event also marked the starting gun of a bull run. The market embarked on a year-long rally, with Bitcoin soaring from its low of $3,800 to an all-time high of $65,000—a staggering 16.11x increase.

5/19 Incident: Hash Power Migration

On May 19, 2021, China’s Financial Stability and Development Committee under the State Council issued a statement calling for a crackdown on Bitcoin mining and trading. This was followed by coordinated action from multiple ministries to launch a nationwide ban on cryptocurrency mining. Alongside the mining ban, several exchanges announced service suspension for users in mainland China.

This “5/19 Mining Ban” represented another national-level regulatory blow following the 9/4 ICO ban, and it sent shockwaves through the crypto market. Bitcoin plummeted from $43,000 to $30,000 in a single day—a drop of over 30%. The mining sector underwent a massive reshuffling as mining rigs were sold off at steep discounts and Chinese miners began relocating to low-electricity-cost countries such as Kazakhstan, the United States, and Russia.

However, from a long-term perspective, the decentralization of Bitcoin’s hash power significantly reduced geopolitical risk and accelerated the global regulatory compliance process. As Texas and other U.S. states became new mining hubs, agencies like the SEC increased scrutiny on crypto mining firms. Additionally, as centralized exchanges faced restrictions, trading volumes on decentralized exchanges (DEXs) like Uniswap surged.

Following this event, Bitcoin traded sideways for about two months. In late July, it began a new upward trend from around $30,000, eventually hitting a new all-time high of $69,000 five months later.

Terra/Luna Collapse: The Algorithmic Stablecoin Crisis

In May 2022, Terra’s algorithmic stablecoin UST lost its peg, triggering a “death spiral” that saw its governance token LUNA’s circulating supply explode from 350 million to 6.5 trillion. LUNA’s price collapsed from over $60 to less than $0.10 in a matter of days. Despite Terraform Labs’ emergency intervention—using billions in Bitcoin reserves to buy back UST—the effort failed. Ultimately, this $40 billion ecosystem empire crumbled.

The rapid disintegration of the Terra ecosystem triggered a cascade of market failures. Bitcoin dropped from $40,000 to $27,000, and even stablecoins like USDT briefly lost their peg. The crisis also led to the bankruptcy of major players including Three Arrows Capital (3AC), Celsius, Voyager Digital, and BlockFi.

The Terra collapse was akin to crypto’s “Lehman moment.” It exposed fundamental flaws in the algorithmic stablecoin model, plunging trust in such assets to record lows. At the same time, it drove investors toward more compliant stablecoins like USDC. Moreover, this unprecedented failure of a top-tier ecosystem accelerated regulatory scrutiny of both stablecoins and the DeFi space.

Crucially, it reminded users of the importance of diversified asset management and underscored the fragility of the crypto financial system.

The collapse severely damaged market sentiment. Bitcoin entered a prolonged six-month bear market, only stabilizing towards year-end. However, this deleveraging event arguably laid the foundation for a volatile recovery through 2023, culminating in a new all-time high of $73,700 in March 2024.

FTX Implosion: The Collapse of Off-Chain Trust

In November 2022, FTX—a globally prominent cryptocurrency exchange—collapsed in a matter of days, becoming one of the most dramatic implosions in crypto history. The crisis began with a CoinDesk report revealing severe issues in the balance sheet of Alameda Research, a firm closely linked to FTX. A panic ensued, and within 72 hours, users withdrew about $6 billion from the exchange, exhausting FTX’s liquidity. On November 11, FTX filed for bankruptcy. Its $32 billion valuation vanished, and founder Sam Bankman-Fried (SBF) was later charged with wire fraud, securities fraud, money laundering, and more. In 2023, he was sentenced to 25 years in prison.

This trust crisis rocked the crypto industry. Bitcoin dropped from $21,000 to $15,500, a 26% loss. The FTT token crashed 90% in a single day—from $22 to under $2. Lending platforms like BlockFi and Genesis also went under.

(Source: TradingView)

The FTX collapse exposed fatal flaws in centralized exchanges, highlighting that even leading platforms can pose systemic fraud risks. However, it also pushed the industry toward more transparent and resilient financial systems. Traditional institutions like BlackRock began requiring bank-level compliance from crypto firms. Regular proof-of-reserve disclosures became standard practice among exchanges. The disaster also accelerated regulatory development, such as the EU’s MiCA regulation mandating asset segregation at exchanges.

From a market perspective, the FTX collapse had only a temporary impact. After roughly two months of stagnation, Bitcoin and the broader market recovered, kicking off a new upward cycle.

Common Traits of Market Crashes

In reality, while the triggers behind each major crypto crisis differ, ranging from external shocks like pandemics or regulatory changes, to internal issues such as project collapses or exchange fraud, or even compounded technical and emotional factors, these events often share several common characteristics:

• Regulatory Uncertainty: Whether as a trigger or a consequence of a crash, regulatory policy and attitudes always impact the crypto market to varying degrees. Nonetheless, a clearer regulatory framework ultimately propels the industry toward healthier and more sustainable development.
• Hazards of Excessive Leverage: Known for its extreme volatility, cryptocurrency offers the potential for high returns but also entails significant risks. In every crash, high-leverage trading has acted as an accelerant, triggering a death spiral of “decline – liquidation – sell-off – further decline.”
• Correlation with Traditional Financial Markets: With the introduction of Bitcoin spot ETFs, the crypto market is increasingly influenced by global macroeconomic trends and policy shifts. Its correlation with traditional financial markets continues to grow stronger.
• Catalyst for Industry Evolution: Each crisis serves as a revealing lens, exposing vulnerabilities and risks in the industry. But in doing so, it also sparks innovative solutions, paving the way for a more resilient, transparent, and robust ecosystem that underpins long-term sustainability.

For the crypto industry, the market evolves in a spiral of destruction and rebirth. Whether it’s the short-term pain from sudden shocks or the lingering aftershocks of trust crises, the market consistently revives with remarkable vitality, fueled by new narratives that drive it toward ever-greater achievements.

Lessons for Market Participants

After every market storm, the crypto industry tends to grow deeper and stronger roots. Yet, those who are run over by the wheels of time rarely make a return. The collapse of FTX, the downfall of Terra, and the bankruptcies of major players like Three Arrows Capital serve as stark reminders: in this nascent market, only those who respect risk and move cautiously can emerge as long-term winners.

For Investors:

• Diversify your portfolio — Never put all your eggs in one basket. Store your assets on compliant exchanges whenever possible.
• Practice sound risk management — Set stop-losses and manage leverage based on your risk tolerance.
• Prioritize security — Learn to use hardware wallets and secure storage solutions. Avoid chasing high yields and choose transparent, compliant platforms and tools.

For Project Teams:

• Prioritize asset security — Conduct regular code audits and establish bug bounty programs to prevent technical vulnerabilities and hacks.
• Stay compliant — Closely follow regulatory developments to ensure legal compliance.
• Build resilient ecosystems — Create sustainable economic models and self-sufficient systems to prolong project longevity.
• Foster strong communities — Focus on engaging long-term supporters rather than short-term speculators.

For Exchanges and Financial Platforms:

• Enhance risk controls — Implement strict asset segregation, multi-signature wallets, and layered security measures.
• Boost operational transparency — Perform regular third-party audits and make findings public.
• Proactively comply with regulations — Build robust compliance frameworks.
• Prepare for stress scenarios — Regularly run simulations and establish liquidity emergency plans.

For Regulators:

• Balance innovation and risk management — Design policies that protect investors without stifling innovation.
• Strengthen international cooperation — Work together to address the global nature of crypto challenges.
• Educate investors — Promote the establishment of standardized risk warnings across the industry.

Conclusion

The history of cryptocurrency development has consistently shown that the darkest moments often give rise to the brightest dawn. When viewed over a longer time frame, even the biggest market shocks are just ripples in a vast river. Those who learn from history and embed risk management into their DNA are the ones who will stand out in the next cycle.