After the collapse of FTX, the crypto sector will fight again

The failure of the FTX platform has eroded investor confidence and threatened the nascent crypto sector, prompting its key players to mobilize to save it.

The boss of the largest cryptocurrency exchange communicationBinance, did everything to reassure investors on Tuesday.

“Projects that survive these difficult times will be much stronger in the future,” said Changpeng Zhao.

But right now, the market is shaky.

According to data from Coingecko, cryptocurrencies are valued at $870 billion, a website listing more than 13,000 of them through 600 exchanges.

Less than ten days ago, it was over $1 trillion and peaked a year ago at $3 trillion, most of which evaporated as the bitcoin price fell (-74% over a year), in addition to There is also Ethereum (-73%) or Dogecoin (-67%).

The bankruptcy of FTX, which even at the beginning of November is still considered one of the most reliable platforms, is a reminder to investors of the uncertainty of the industry.

The company had to liquidate its crypto files and shares in companies to pay its creditors, flooding the market.

The cryptocurrency has been recovering from a similar crisis in the first half of the year as Terra saw the price crash, dragging bitcoin down with it.

‘Pour water on fire’

But this time, FTX is an even bigger player.

“There are similarities to Lehman Brothers”, the Wall Street giant that went bankrupt in 2008 amplified financial crisisWalid Koudmani, analyst at XTB, who told AFP that the possibility of a complete end to crypto may even emerge.

However, the drop in cryptocurrencies comes in a rising global market and seems to indicate that cryptocurrencies have not yet significantly correlated with the real economy.

“But I don’t think it’s going to fail as an industry or a concept,” says Koudmani.

For many observers, the existence of the field will have a lull far different from the first decentralization and decentralization ideals.

In 2017, bitcoin saw its price skyrocket before crashing, but after several years passed, nicknamed “crypto winter,” it returned with a vengeance at the end of the year. 2020, rising to a record level of nearly $65,000 in early 2021.

Marion Laboure, an analyst at Deutsche Bank, said she believes the failures of FTX will help clean up the sector.

“We believe this second ‘crypto winter’ will be a positive as the collapse of FTX will bring the crypto ecosystem closer to the established financial sector,” she said. speak.

Currently, “market concentration is greater than ever, with Binance being the biggest winner,” Laboure said.

“They are trying to add water to the fire, but if you watch the FTX situation, Binance has a pretty important role to play,” Koudmani added.

Chaos Platform

It remains to be seen whether the current major players, exchange platforms like Binance and Coinbase, are among the survivors.

They allow users to buy and sell cryptocurrencies, but also offer more or less complex derivatives on these inherently volatile assets and are at the heart of the ecosystem.

But they are often based in regions with lax laws: FTX has its headquarters in the Bahamas, while Binance has no centralized headquarters, making the job of regulators difficult.

The bankruptcy of FTX is causing some users to withdraw because they fear that their buying platform has also used their cryptocurrency to invest.

Among the platforms that are in turmoil, the most important right now is Crypto.com, whose boss admitted to a mistaken transfer of several hundred million dollars, but claimed to have recovered the funds.

For its part, Binance claims to have the necessary liquidity to face the crisis and says it is ready to publish “proof”.

Zhao announced on Monday the launch of a rescue fund and also proposed the creation of an industry body bringing together the biggest players in the industry. But he also said he would rescue FTX early last week, before giving up due to the mission being too big.

© 2022 AFP