The Fall of FTX and What It Means For the Markets?
Binance announced its plan to sell all its $500 million holdings in FTX and though it initially said it would help save the struggling exchange, it quickly turned around and said it would be unable to, as the situation was ‘beyond’ what they could help with.
The future of FTX is unclear at the moment, as both FTX and Alameda Research have seen a slew of resignations and the former is currently under investigation.
If you're preparing for investment-related roles or asset management and wealth management, take heed as this has spooked investors worldwide and will impact how they choose to utilise their money.
How does the FTX crisis affect the rest of the crypto world❓
Bitcoin has already seen a sharp drop, now at $16.5k a coin from $20k, the lowest value it has been at since 2020. Altcoins such as XRP, Cardano, and Dogecoin fell by 10% and companies that banked on FTX are now having to reassure investors and prove their liquidity. The crypto market itself has already lost about $180 billion.
Tether, which is considered a ‘stablecoin’ and is valued at $70 billion, is now the focus of attention. It slipped a touch by trading at $0.98 earlier this month. Paolo Ardoino, CTO of the company who helps issue Tether, remarked that $700 million in withdrawals had been handled, with “no issues”, in an attempt to calm down nervous investors.
How does the crisis affect other markets ❓
The prospect of an oncoming “crypto winter” is challenging an already stressed financial industry. In November of last year, the crypto market peaked at $3 trillion, but nose-dived after a collapse caused by larger macroeconomic issues affecting the crypto industry. It’s now at about $800 billion. Financial markets worldwide have already taken a hammering, thanks to issues like inflation, geopolitical tensions, and interest rates continuing to rise. This upcoming crypto winter is expected to last longer, given the damage that has been done to the industry’s reputation.
💡However, interestingly enough, traditional financial markets may not be as affected by the recent woes of the cryptocurrency market. This is due in part to institutional investors continuously looking for high-return investments. With crypto seemingly less valuable than before, securities such as bonds are now more appealing. This leaves those in the financial sector exploring non-crypto securities to entice potential investors. In fact, 67% of ‘fund selectors’ believe investors shouldn’t even have access to cryptocurrencies due to regulatory and transparency issues.
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