The FTX Blowup is done, what’s the way forward for the crypto markets?

If you’re a regular in the crypto space, you must already know of the grand FTX fiasco that has caused a steep decline across the global crypto markets with about all cryptocurrencies trading today witnessing price losses. As a crypto trader, it’s a very obvious question to be asking yourself: now what happens to cryptocurrencies? What’s the way forward out of this scandal? We’ll explore exactly that in this blog post.

So, how did FTX run into trouble in the first place?

FTX is one of the biggest cryptocurrency exchanges across the globe, allowing users to exchange one cryptocurrency for another or fiat currency and vice versa. Sam Bankman-Fried oversaw FTX. The exchange’s native token is called FTT, and at the beginning of November, it was reported by CoinDesk that Alameda Research, a hedge fund that is also under Bankman-Fried, holds quite a lot of FTT tokens. This event caused quite a stir among crypto enthusiasts, as FTX and Alameda are supposedly not interlinked.

Binance, a competitor, announced it would sell its FTT holdings right on the heels of this revelation. FTT’s price dropped on cue and the exchange suffered a severe lack of liquidity. The situation only worsened when Binance pulled out of a proposed deal to purchase FTX.

Why is the crypto market being impacted by the FTX situation?

The global markets struggle with scams and mishaps caused by a lack of regulatory measures regularly, and many investors already remain wary for such reasons when trading. The fall of FTX has shaken up the market badly again, especially because the platform appeared to be more stable than other similar businesses. The crypto markets were only beginning to see some signs of a rally with Bitcoin crossing the $19,000 mark after quite a long while right before the FTX scandal, which did indeed affect the markets badly enough again to send most cryptos including Bitcoin and Ethereum plummeting. As of the middle of November, 2022, the markets are still looking for a new bottom.

What does the fall of FTX signal for the future of cryptocurrency?

The unexpected fall of FTX has sparked concerns about the viability of cryptocurrencies in general, but especially about the legitimacy of the exchange platforms used to trade crypto. A domino effect might be seen to disrupt larger, established financial markets. Further, quite a few more lawsuits against the exchange and its executives are anticipated to result from FTX’s demise. Real regulatory changes may also be pushed through by lawmakers across the world, which may or may not be helpful to crypto trades as they have been done so far.

What will happen to the crypto markets now that FTX is as good as dead?

Bitcoin still dominates the crypto market, and the rest of the market usually follows when the so-called “King” moves. The market may suffer further if Bitcoin fails to push up and away from its recent bottom, which has been too close to $16,000 for comfort. Notably, this is the worst price performance Bitcoin has witnessed in over a year now.

The Federal Reserve’s commitment to aggressive interest rate hikes to tamp down inflation has also been a major contributor to the crypto market’s not-so-impressive late 2022 performance. Investors had been expecting a change of course, but now with the FTX fiasco, it’s hard to say for sure when the markets will recover for good.

Upcoming difficulties for the sector

Whatever the outcome of the FTX issue, it is abundantly evident that the ramifications will provide significant hurdles for the crypto industry. Bankman’s credibility having been destroyed, regulators might adopt a strict stance when policing the cryptocurrency market. Customers are in danger as FTX fails, which is something regulators want to prevent at all costs.

Additionally, the current incidents will probably result in a further fall in trust in centralized systems after several so-called “CeDeFi” businesses like Celsius prevented clients from accessing their assets when they went bankrupt.

However, the event did encourage more cryptocurrency users to move their assets to cold wallets, and not many have pulled out of the market altogether. Right now, all we can do is wait and see which direction the crypto markets will move into before forming a firm trading strategy.

Conclusion:

While these terrible events can affect the values of cryptocurrencies, bear markets do also give investors a chance to amass fundamentally good assets at a discount. Over the past 14 years, crypto has drawn some of the world’s best minds despite facing existential dangers from time-to-time. So there is definitely reason to believe that the crypto markets as a while will pull through this time too.

While history doesn’t always repeat itself, it frequently rhymes since unfavorable price action and bad news have been overcome by cryptocurrency in the past. To sum it all up, while it appears FTX is no longer in operation and the crypto winter is still here, individuals who intend to stick around will quite certainly see better days.

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