The crypto industry has been faced with an unfriendly period as the price of crypto assets has continued to decline massively.
With the year 2022 almost over, Crypto traders have been faced with huge losses after so many challenges that affected different crypto platforms negatively impacted their investments.
The collapse of the FTX Crypto exchange platform had a major negative impact on the crypto industry as investors pulled out huge sums over concerns of further decline in the prices of crypto.
Tekedia Mini-MBA edition 15 (Sept 9 – Dec 7, 2024) has started registrations; register today for early bird discounts.
Tekedia AI in Business Masterclass opens registrations here.
Join Tekedia Capital Syndicate and invest in Africa’s finest startups here.
The Impact of FTX collapse on The Crypto Industry
The World’s second-largest crypto exchange filed for chapter 11 bankruptcy on November 11, after the $32 billion company saw its revenue massively decline which forced investors to pull out their funds until the platform halted withdrawals.
This affected the crypto market which was already in an awful state as the prices of crypto assets fell further.
Ever since reaching astronomical highs in November 2022 which saw Bitcoin hit $69,000, it price has so far plummeted to around $18-20 with other altcoins following suit.
The FTX collapse further fueled volatility in the crypto market as the price of tokens continue to jump up and down throughout this period.
The impact of the FTX failure on the entire crypto industry is ongoing and challenging the measure.
The ongoing implosion of FTX will no doubt have an impact on the public perception of the industry, as well as regulatory and political consequences.
Some analysts have predicted that the impact of the FTX collapse on the crypto industry will take some time to recover, also, on the other hand, clients on the FTX platform will have to take legal action to recover their assets.
Regulatory Impact of FTX Collapse on the Crypto Industry
After the shutdown of the FTX crypto exchange platform, at least 11 major exchanges including Binance, Crypto.com, Gate.io, Kraken, KuCoin, Poloniex, Bitget, Huobi, OKX, Deribit, and Bybit have all announced plans to publish proof-of-reserve statement regularly, or have pointed out that they already do.
Crypto exchange Kraken went a bit further as it already has proof-of-reserve audits in place, which it tweeted not only a statement about its commitment to such audits but have also detailed instructions on how to ensure that individual users’ accounts have been audited.
The Securities and Exchange Commission (SEC) and state securities regulators have also been getting increasingly aggressive about their contention, which they fined BlockFi $100 million for failing to register its crypto lending operation under the securities act.
At the beginning of the year, SEC chairman Gensler warned cryptocurrency exchanges that the SEC would be targeting them for failing to register with the SEC as securities brokers.
Also, the ftx collapse has attracted political power, as the industry has been facing a fair amount of success in pushing its agenda in Washington, D.C. this year, where a duo of bipartisan bills seeking to regulate the industry has been introduced.
Many members of the house and senate in the U.S. have also put out statements calling for speedy legislation as they disclose that the latest upheaval in the industry, calls for reinforcement and the need for greater federal oversight of the digital asset industry.
What Investors And Analysts Are Saying About The Recent Crypto Industry Upheaval
Investors don’t appear to be concerned about the impact of FTX on bitcoin’s future,” said Alyse Killeen, founder and managing partner of venture firm Stillmark.
To that end, her company recently invested in bitcoin infrastructure firm Hoseki, a company that is also backed by the parent company of Fidelity.
Killeen added that the drop in bitcoin prices that was occurring even before the FTX meltdown is a sign that cryptocurrencies are not yet a true hedge against inflation and a stronger dollar.
On the other hand, CNBC’s Jim Cramer has told investors that they still have time to sell their cryptocurrency holdings.
Cramer, who has warned against staying in speculative assets while the Fed continues to tighten the economy, reiterated his argument and said that investors shouldn’t be fooled by some coins’ inflated market capitalization.
He added that he expects more marginal names including XRP, dogecoin, Cardano, and Polygon to fall much further, possibly to zero.
Meanwhile, American Billionaire Entrepreneur Mark Cuban believes that crypto still has a lot of value.
Cuban who has endorsed crypto investments, while investing heavily in several projects and firms in the industry, disclosed that people should not be discouraged by the FTX collapse, rather they should ignore the noise and look at the big picture.
In an interview, he said “Separate the signal from the noise. “There’s been a lot of people making a lot of mistakes, but it doesn’t change the underlying value.”
He further stated that, as long as investors have viable options in the crypto world, he doesn’t foresee virtual assets going into oblivion.
The FTX upheaval has no doubt put immense pressure on exchange platforms everywhere, with users nervous about exchange holdings, as few analysts disclose that rebuilding the market confidence will likely take months or years.
Conclusion
While some investors and analysts have predicted a possible surge in the prices of crypto assets, several others have predicted a further decline in the price of cryptocurrencies, as investors are left with no option but to do whatever they feel is the right for them.
As the dust of FTX collapse is still yet to settle, investors are skeptical if this is the end of Bitcoin or if this is just one of those occurrences in the industry. Only time will tell.