2022-11-13 12:00:00

What is Next for Crypto After FTX Collapse Triggers Lehman Moment?

People who possess cryptocurrencies are becoming alarmed due to the shocking collapse of the FTX exchange, one of the most prominent and most recognized players in the market for digital assets, and investors are taking cover.

 

Numerous questions still need to be solved. But two critical questions loom: How extensive will the harm be? And can the battered cryptocurrency sector recover?

 

Insiders in the sector are arguing whether to refer to the collapse of FTX, which declared bankruptcy on Friday, as a “Lehman moment,” about the 2008 collapse of the investment bank that rocked the entire world. Many believe it to be a good comparison.

 

It is evident that the effects of the FTX crisis significantly increase volatility in the crypto ecosystem. The incident has undermined public confidence and encouraged regulators, who are currently on high alert.

 

It will take some time to recover,” said Jay Jog, co-founder of the blockchain firm Sei Labs, based in California. “This was one of the most trusted companies in the crypto sector.”

 

Best-in-class to insolvency

 

The failure of FTX, introduced in 2019 by Sam Bankman-Fried, a 30-year-old wonderkid formerly regarded as a modern-day J.P. Morgan, has been described by cryptocurrency investors and analysts in those terms.

 

The company received a $32 billion valuation in its most recent fundraising round. It attracted high-profile backers, including SoftBank, Tiger Global, Singapore’s Temasek, and stars like Tom Brady, Gisele Bündchen, and Naomi Osaka. The Miami Heat’s home arena bears its name.

 

Investor Sequoia Capital announced this week that it had reduced the value of its FTX holding to zero. According to reports, the exchange could not satisfy customer withdrawal requests despite being short between $8 billion and $10 billion. After a bailout from competitor Binance fell through, Bankman-Fried resigned Friday and FTX filed for bankruptcy protection in the United States.

 

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