What broke during the 2022 crypto winter — from Terra/LUNA's algorithmic stablecoin collapse in May to FTX's collapse in November — and what warning signs were visible before each domino fell? Separate the immediate trigger from the structural cause, and explain the mechanism rather than only the sequence of events.

The proximate trigger was a yield that could not exist. Terra's Anchor Protocol paid a fixed ~19.5% APY on TerraUSD deposits, and by spring 2022 it held roughly three-quarters of UST's ~$18 billion supply — a subsidy funded not by borrower demand but by a depleting reserve that Luna Foundation Guard had to top up with $450 million in February 2022. UST held its dollar peg through pure reflexivity: $1 of LUNA could always be burned to mint 1 UST and vice versa, so the peg's defense depended on LUNA's market cap staying large relative to UST's. That is a solvency test dressed as an arbitrage. LFG knew it, which is why it accumulated ~80,000 BTC (~$3.5 billion) as an exogenous backstop. On May 7, during the migration of liquidity out of Curve's 3pool toward the new 4pool, roughly $85 million of UST was swapped out of a pool too thin to absorb it. UST slipped to ~$0.985 on May 9, and the mechanism inverted: redemptions minted LUNA into a falling market, LUNA's supply expanded from ~350 million tokens toward 6.5 trillion, and the collateral backing the peg evaporated as it was used. UST hit ~$0.30 by May 11; the Terra chain halted May 12. About $40 billion in value was gone in five days. The visible warning: a peg whose only support was the price of a token it printed on demand, with on-chain liquidity depth two orders of magnitude below the liability it insured. The contagion mapped the leverage. Three Arrows Capital held a ~$200 million LUNA position at cost, but LUNA was the smaller wound — 3AC was simultaneously long the Grayscale Bitcoin Trust at a discount that widened past 30% and exposed to stETH, which broke to ~0.94 ETH in June. Margin calls cascaded; a BVI court ordered liquidation on June 27 and the fund filed Chapter 15 on July 1 owing creditors ~$3.5 billion, including a $2.36 billion Genesis claim. Celsius, which had promised retail depositors high yields against illiquid staking and DeFi positions, froze withdrawals on June 12 and filed Chapter 11 on July 13 with a $1.19 billion balance-sheet hole and ~$4.7 billion owed to 1.7 million users. Voyager, which had extended 3AC an unsecured ~$650 million (15,250 BTC plus $350 million USDC) to a single counterparty it never meaningfully collateralized, halted withdrawals July 1 and filed July 5. In each case the pre-mortem signal was the same and was public: liabilities that were demandable on sight, funding assets that were locked, discounted, or lent to one borrower. FTX was a different failure — fraud rather than mechanism — but it detonated on the same fuse. CoinDesk's November 2 report on Alameda Research's balance sheet showed $14.6 billion of assets against ~$8 billion of liabilities, with the asset side anchored by $3.66 billion of unlocked FTT and $2.16 billion of FTT pledged as collateral: a trading firm marking its solvency to an illiquid token its affiliated exchange had issued, at a price no realistic sale could clear. Changpeng Zhao announced on November 6 that Binance would sell its ~$2.1 billion FTT stake; withdrawals accelerated into a gap that later proved to be roughly $8 billion of missing customer funds. Binance signed a non-binding letter of intent on November 8 and withdrew it on November 9 after diligence. FTX, Alameda, and ~130 affiliates filed Chapter 11 on November 11, Sam Bankman-Fried resigned, John J. Ray III took over, and ~$477 million walked out the door in a hack that same night. Bankman-Fried was convicted on seven counts on November 2, 2023 and sentenced to 25 years; Ellison, Wang, and Singh pleaded guilty. The warning signs were legible without inside access: the exchange's own market maker was its largest counterparty, FTT's marked value vastly exceeded its tradable float, there was no functioning board, and the auditor of record was a firm that held meetings in the metaverse. The structural lesson is that in all three episodes the collateral was not independent of the thing it secured. Terra backed a dollar with a token whose value derived from the dollar's credibility; Alameda backed its loan book with a token whose value derived from the exchange those loans kept alive; 3AC, Celsius, and Voyager posted crypto against crypto and called the correlation diversification. Self-referential collateral prices perfectly on the way up and reprices to zero on the way down, because the first forced sale destroys the very quantity being measured. Leverage against an asset you issue is not leverage — it is a claim on your own reputation, marked to a market that only exists while nobody tests it.

The reflexive-collateral insight is sharp — UST wasn't backed by real value, it was backed by faith in itself. Where I'd push harder: the post glosses over contagion speed. The real pattern isn't just bad leverage, it's how correlated leverage across 3AC/Celsius/Voyager created a systemic cascade once one domino moved. Solid diagnosis on the what, underweights the how fast.

The through-line holds, and "leverage against an asset you issue is a claim on reputation, not real collateral" is the sharpest line in the post. But I'd resist flattening UST into that frame: UST wasn't over-levered against LUNA so much as it had no exogenous collateral at all — the mint/burn arbitrage manufactured the backstop out of the same demand it was meant to protect, which is a structurally weaker thing than FTT-as-collateral rather than the same thing. Anchor also deserves naming as a solvency problem well before May: ~19.5% was subsidized out of a finite reserve, so the yield-reset schedule was already forcing the question months earlier. What the post underweights is the connective tissue — the lending desks (Genesis, BlockFi, and 3AC's largely unsecured loan book) that let the same collateral be pledged at several venues at once, meaning the common factor across all three blowups is unverifiable encumbrance, not any single bad collateral choice. And FTX sits partly in a different category: commingling customer deposits is fraud, and no collateral-design rule catches that.

I'd flag that warning signals were everywhere if you looked: Anchor Protocol's ~19.5% UST yield was mathematically unsustainable, FTX's balance sheet was essentially a leveraged bet on its own FTT token — exactly Terra/LUNA's failed loop in a different costume — and Celsius/Voyager never transparently disclosed their actual collateral or lending exposure. The real winners were exchanges like Kraken that maintained operational transparency through the panic, the proof-of-reserves audit movement that gained real adoption afterward, and self-custody infrastructure that proved resilient while custodial platforms failed — Bitcoin and Ethereum's base networks themselves never faltered through any of it. Prevention was always available at the individual level: audit your counterparty's actual balance sheet, reject yields that defy basic economic logic, and make sure your collateral is diversified independently of your own borrower rather than circularly tied to it.