Governments that had long demurred on regulation are suddenly pressing for more oversight, while federal regulators and law enforcement have rolled out multiple civil and criminal investigations.

The crypto industry is calling this moment its “crypto winter.” They say it’s cyclical, much like a bear market for Wall Street — something that has happened before and will eventually blow over.

But experts say the ferocity and scale of this downturn could end up leading to more of an ice age.

“Where we are is at a deeply existential point for the industry,” said Yesha Yadav, a law professor at Vanderbilt University who closely follows cryptocurrency regulation.

A major determining factor: “How deep is the rot?”

The spectacular rise and fall of the cryptocurrency markets has rocked its world of investors and boosters, who just a year ago were riding at the top of the market. Finance experts have compared the collapse to other major busted bubbles in the past — from the dot-com crash two decades ago, to a run on Florida property a century ago.

Crypto has crashed before, but this time it fell from a greater height — having gained mainstream acceptance in a way it hadn’t before, even finding itself in some 401(k)s and pension funds for retirees. It’s unclear whether it can recover.

Created a little over a decade ago and fueled by the global financial collapse, cryptocurrencies are computer-run digital assets intended to function outside established financial institutions, whether a bank or government.

The most popular cryptocurrency, bitcoin, was created in early 2009 as a way to sidestep the need for financial middlemen, revolutionize the global economic system and make it easier for people to do business directly with each other. It has gone through several boom and bust cycles — most notably in 2017 and 2018, when the price of bitcoin rapidly rose to around $20,000 before a series of high-profile scams and rumors of some countries planning to ban trading in cryptocurrencies led to it losing 80 percent of its value in just a few months.

The hangover from that crash persisted for some time, but the crypto world starting booming again amid the pandemic. Interest rate cuts made it cheaper for people to borrow money and invest in speculative assets. Stock trading apps and new easy-to-use crypto exchanges made the complicated process of buying and selling crypto coins easy and accessible for millions of people who until recently hadn’t heard of bitcoin. Non-fungible tokens, or NFTs, used crypto technology to allow people to trade digital art — which also took off.

By November 2021, a Pew survey said that one in six Americans had invested in crypto. The same month, the total value of cryptocurrencies tracked by data company CoinGecko surpassed $3 trillion, roughly equal to the GDP of the United Kingdom.

A single bitcoin was worth nearly $68,000, nearly four times what it was worth at its previous peak in 2017. The NFT market approached $25 billion in 2021.

“The whole model was working fairly well as long as the line continued to go up,” said Molly White, a software engineer who became one of the most prominent skeptics of the crypto industry by cataloguing its scams, idiosyncrasies and failures in her blog. “We’re seeing what happens when that assumption no longer holds.”

One of the biggest winners of the crypto boom was Bankman-Fried, whose cryptocurrency exchange FTX made money by charging transaction fees every time someone used it to buy and sell crypto.

It won millions in investments from well-respected venture capital firms like Sequoia, and pension funds like the Ontario Teachers’ Pension Plan, which valued the company at $32 billion.

With his mop of curly brown hair, Bankman-Fried landed on the cover of Forbes and became one of the richest people in the world, his wealth valued at $22.5 billion. The Bahamas resident told the magazine, as he had told others, that he was not earning the money for himself. Instead, he said, he’d eventually give it all away — an altruistic mission that he said brought him into the crypto world.

“My goal is to have impact,” he told the magazine.

Bankman-Fried gave millions to politicians, and was the second-largest political donor to Democrats in the 2022 midterm elections. He used his newfound influence to push for regulations that competitors said would give his own company an advantage.

Splashy advertisements featured celebrities like NFL star Tom Brady, tennis champion Naomi Osaka and NBA mainstay Stephen Curry, all of whom helped hawk the idea that FTX was the industry’s easy and reliable future.

“You in?” Brady asked his friends repeatedly in one TV commercial.

Many were. The company said it had over 1 million U.S. users and 5 million worldwide by the end of 2021.

But earlier this year, the crypto euphoria started to give way. Rising interest rates, inflation and concerns about a potential recession made investors risk-averse. Tech stocks, which had long marched steadily upward in value, came crashing down, spooking both big financial industry investors and regular people who had gotten into stock and crypto trading, too.

The first major blow came in May when a digital coin called TerraUSD — a widely held “stablecoin” algorithmically designed to be pegged to the dollar — crashed. The surprise sell-off helped erase more than a quarter of the crypto market’s value.

In June, Celsius Network, the crypto bank and lender that offered double-digit interest rates, suddenly announced that it was halting withdrawals, sending cryptocurrency prices tumbling further. The bank, which had amassed some $20 billion in assets at its pinnacle, filed for bankruptcy in July.

Around the same time, a crypto-focused hedge fund defaulted on a $665 million loan taken from a crypto lender, Voyager Digital — eventually leading both the hedge fund and Voyager to file for bankruptcy.

Meanwhile the prices of bitcoin, digital coin ethereum and other crypto assets plummeted.

“Crypto winter” was coming.

But Bankman-Fried and FTX so far appeared unscathed. The exchange had made successful bids to bail out rivals including Voyager — winning it praise. (Voyager pulled out of the deal when FTX filed for bankruptcy).

That changed in November, when crypto-focused news outlet CoinDesk ran a story reporting that much of the value of Bankman-Fried’s hedge fund, Alameda Research, was composed of a crypto token that FTX had created itself. The two companies were supposed to have clear divisions, and the story set off a wave of scrutiny.

Canadian-Singaporean entrepreneur Changpeng Zhao, the owner of FTX’s larger rival Binance, announced he would sell his roughly $500 million stake in FTX’s special token, sparking a broad sell-off and causing its value to plummet.

The company froze withdrawals, and began looking for emergency investments. Binance announced it would take over FTX but canceled the deal just a day later, after Zhao said the company had “mishandled customer funds.”

FTX, Alameda and dozens of other related entities run by Bankman-Fried filed for bankruptcy. He stepped down as CEO. Voyager is currently looking for a new buyer.

Douglas Campbell lost $27,000 on FTX’s U.S. exchange and “tens of thousands” of dollars on FTX’s international exchange. The 42-year-old said he was drawn in by Bankman-Fried’s pledges to share his wealth and his MIT pedigree.

“So this was kind of just devastating,” said Campbell, an economist living in Arlington, Va. “Now it’s just kind of like clear that most of crypto is a scam.”

On Monday night, just a day before Bankman-Fried was set to testify before a House committee, he was arrested at his home in the Bahamas, where he lived and where FTX was headquartered, at the request of the U.S. Justice Department. Federal prosecutors are seeking his extradition.

Bankman-Fried was indicted on eight charges, including fraud, conspiracy and money laundering. Federal prosecutors alleged that, among other crimes, Bankman-Fried had used billions of dollars of customer funds for personal investments and political contributions, and used the money to repay billions in loans to Alameda. The Securities and Exchange Commission and the Commodity Futures Trading Commission filed civil charges with similar allegations.

FTX owes its top 50 creditors $3 billion, according to the company, which is now being run by a bankruptcy expert whose sole job is to recover as much money as he can for investors and customers.

John J. Ray, the bankruptcy lawyer who took over as FTX’s chief executive, testified before the House Financial Services Committee on Tuesday, alleging the company used QuickBooks, personal accounting software, for record-keeping.

Ray said that the allegations against Bankman-Fried were not sophisticated, but rather “plain old embezzlement,” and that many investors may not see all their money.

“At the end of the day, we’re not going to be able to recover all the losses here,” he said.

Bankman-Fried has not officially responded to the charges, but in numerous media interviews before he was arrested, he painted himself as a well-meaning founder who was in over his head. He insisted that if funds had been mixed between Alameda Research and FTX — a core part of the government’s charges against him — he didn’t do it knowingly.

Mark Botnick, a spokesman for Bankman-Fried, declined to comment.

“If this is happening at FTX, then where else?” said Yadav, the Vanderbilt professor. “That’s where the existential question comes from.”

Other cryptocurrency players — such as bank BlockFi and lender Genesis — have already fallen or are working to stave off bankruptcy. In the wake of Bankman-Fried’s arrest, rattled investors have withdrawn some $3 billion from Binance, though Zhao has downplayed the panic.

The total value of the world’s cryptocurrencies tracked by data company CoinMarketCap is now around $850 billion, down from $3 trillion a year ago. The average value of cryptocurrency trades per day has fallen from $131 billion in May to $57 billion in December — a drop of more than half, according to CoinGecko.

Bitcoin’s value has plummeted 65 percent this year, to around $17,500, although that’s still more than it was worth for the majority of its existence.

Many cryptocurrency proponents remain bullish — seeing the year’s collapse as just another convulsion in the technology’s lurch toward the future.

“In my view, crypto is just the next new technology, and every new technology has these rises and falls,” said Lou Kerner, the CEO of Blockchain Coinvestors Acquisition Corp. I, a cryptocurrency company.

The FTX collapse and other cryptocurrency failures over the past year have so far not imperiled other financial markets, said Matthew Slaughter, the Paul Danos Dean of the Tuck School of Business at Dartmouth. Cryptocurrency is a relatively nascent technology, he said, and it remains to be seen whether the world will have a use for digital currency beyond speculation.

“It speaks to the reality that cryptocurrencies are not very interconnected in broader capital markets in the broader global economy,” he said, adding that the absence of wider contagion can also be attributed to regulations aimed at ensuring bankruptcies do not spark all-out financial crises.

Darragh Grove-White, a digital marketing specialist from British Columbia, has been investing in cryptocurrency since 2018. Since then, the 37-year-old said, he’s been “rugged,” or scammed, a number of times.

He invested and lost money in Quadriga, a crypto exchange, which Canadian authorities in 2020 found resembled a Ponzi scheme. He also invested in Terra USD and Luna, as well as Celsius Network, and lost money during both collapses this year — and has several hundred dollars frozen on FTX.

His roughly $400,000 total crypto investment value sank to around $40,000. Still, he believes in the future of crypto, citing an “optimism bias.”

“It’s a strength in that you don’t let yourself get discouraged for too long,” he said. “But it’s a weakness in that you sometimes don’t know when to walk away.”

Jeremy B. Merrill contributed to this report.