What FTX Crash Means for the Future of BTC, SOL, SHIB

Sam Bankman-Fried’s crypto exchange FTX crashed within days and began Chapter 11 bankruptcy proceedings. The FTX debacle is the latest in a series of crashes that have rocked the crypto world this year. According to experts, it is possible that the vortex will stimulate efforts for regulation, which is sorely lacking. Thus, it will at least have seen a warning mission for investors.

Crypto winter is getting worse and FTX is its latest victim

The cryptocurrency exchange owned by Sam Bankman-Fried boasted a $32 billion valuation. Not that, Koindeks.com In less than a year, it faced a ‘liquidity crunch’ that had to try to sell itself to competitor Binance. Binance dropped the deal, saying it was “beyond our ability or control to assist.” Later, FTX tried to find a cash infusion elsewhere, but failed. As a result, FTX said on Friday that it has begun its Chapter 11 bankruptcy processes. Bankman-Fried also left the CEO mission.

The collapse is wide-ranging. Contagion concerns fueled by the heavy weight of FTX’s native token on the balance sheet of Alameda Research, a trading firm that is again related to Bankman-Fried, surfaced last week. According to CoinMarketCap, the price of the overall crypto branch dropped 12% in one day to $911 billion. JPMorgan strategists say the FTX debacle will likely transform the branch. In this context, they explain the implications of crypto’s latest boom.

Will the editing work accelerate?

Crypto, partly by its very nature, had little oversight. Regulating crypto requires the proactive involvement of the exchanges themselves. David Yermack, Albert Fingerhut Professor of Finance and Business Transformation and head of finance at NYU Stern School of Business, says:

Separating crypto from the regulator was a design choice. But it has costs and benefits. One of the costs is that it is vulnerable to such events. There is no central node, no leadership, no governing council, no one the government can reach to provide data and take court orders and actually freeze someone’s accounts or place a lien on their assets. Something the government might want to regulate. But it won’t happen without the cooperation of some players in the segment.

There is widespread speculation in the market, but regulators have not caught up. Bankrate analyst James Royal, who writes about wealth and investment, explains:

Regulators are still trying to figure out what to do and how to act. It’s been a long time and there is a real predatory west for anyone who trades crypto.

Large banks may be less likely to allow people to trade crypto Financial institutions such as Goldman Sachs, JPMorgan, and Morgan Stanley have sought to capitalize on the crypto boom last year with services such as crypto futures or derivatives trading. But James Royal says that the crypto winter will likely put pressure on banks to reconsider offering these services and try to distance themselves instead.

Crypto exchanges need to monitor FTX contamination risk

Other exchanges and companies need to be on high alert for the ongoing contagion. David Yermack comments:

A contagion is possible where people are starting to withdraw their presence on other platforms because they see what’s going on here, and they wonder where it might be next. There may be stock markets that have done nothing to question their stability, are merely spectators, but are nevertheless drawn into it.

A cautionary tale about the dangers of investing in crypto!

Therefore, investors need to be careful. Individuals who have already invested should take steps to protect their assets. James Royal draws attention to the following issues:

There is a lot of confusion, uncertainty and lack of transparency about how these exchanges hold funds. If you hold crypto on an exchange, you need to understand how it is held and what recourse you have if your exchange goes bankrupt. The firestorm should be a cautionary tale about the dangers of investing in crypto in the first place. As an investor, you need to critically question what you’re investing in if it could evaporate over the weekend. Prices are entirely based on feeling and belief in the future of crypto… If that belief disappears, you’re left with nothing.

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