Connect with us

Global Banking and Finance Review is an online platform offering news, analysis, and opinion on the latest trends, developments, and innovations in the banking and finance industry worldwide. The platform covers a diverse range of topics, including banking, insurance, investment, wealth management, fintech, and regulatory issues. The website publishes news, press releases, opinion and advertorials on various financial organizations, products and services which are commissioned from various Companies, Organizations, PR agencies, Bloggers etc. These commissioned articles are commercial in nature. This is not to be considered as financial advice and should be considered only for information purposes. It does not reflect the views or opinion of our website and is not to be considered an endorsement or a recommendation. We cannot guarantee the accuracy or applicability of any information provided with respect to your individual or personal circumstances. Please seek Professional advice from a qualified professional before making any financial decisions. We link to various third-party websites, affiliate sales networks, and to our advertising partners websites. When you view or click on certain links available on our articles, our partners may compensate us for displaying the content to you or make a purchase or fill a form. This will not incur any additional charges to you. To make things simpler for you to identity or distinguish advertised or sponsored articles or links, you may consider all articles or links hosted on our site as a commercial article placement. We will not be responsible for any loss you may suffer as a result of any omission or inaccuracy on the website. .

Top Stories

Analysis-FTX debacle sparks investor rethink of battered crypto market

Published : , on

By Gertrude Chavez-Dreyfuss and Elizabeth Howcroft

NEW YORK/LONDON (Reuters) – With major cryptocurrency exchange FTX on the brink of collapse, some investors are beginning to question the viability of a sector already bruised by the bitcoin bubble bursting and closures of key market players.

Crypto markets have come under intense pressure this year, as rising interest rates prompt investors to ditch risky or speculative assets. The collapse of several crypto lenders, including Celsius and Voyager, major tokens terraUSD and Luna, and hedge fund Three Arrows Capital, had rung alarm bells even before the fiasco at FTX, headed by Sam Bankman-Fried.

He was racing on Thursday to find finance to prop up his embattled crypto exchange, according to a Slack message to FTX staff seen by Reuters, after rival Binance scrapped a proposed bailout following a review of the company’s structure and books.

A spokesperson for FTX did not comment on the Slack message. Bankman-Fried later said in a series of tweets that FTX was seeking to raise liquidity.

FTX is scrambling to raise about $9.4 billion from investors and rivals, a source said on Thursday.

Some in the industry say this fundraising challenge could be beyond Bankman-Fried’s reach, however, as concerns over patchy oversight and counterparty risk begin to overwhelm likely returns from the asset class, at least in the near-to-medium term.

“From a financial side, it’s fair to say that confidence is going to be somewhat shaken because if you can’t trust FTX then what can you trust?” Yat Siu, co-founder of Hong Kong-based investor Animoca Brands, told Reuters on Wednesday.

FTX’s swift fall from grace followed heavy speculation about its financial health that triggered $6 billion of withdrawals in just 72 hours earlier this week. The company had published a valuation of $32 billion as recently as January.

“What makes this new phase of deleveraging more problematic is that the number of entities with stronger balance sheets able to rescue those with low capital and high leverage is shrinking within the crypto ecosystem,” analysts at JP Morgan said in a note to clients.

“Now that the balance sheet strength of Alameda Research and FTX is under question only a few months after being perceived as strong balance sheet entities, it creates a confidence crisis and reduces the appetite of other crypto companies to come to the rescue.”

Speaking at the Token2049 crypto conference in London on Wednesday, Andrei Kazantsev, global head of crypto trading at Goldman Sachs, said “counterparty risk is starting to be top of mind” for some clients once drawn to crypto trading by high volatility and yield.

Unlike traditional corporations and financial firms, crypto entities operate in a regulatory gray area. For instance, deposits at crypto lenders are not insured by the government.

In the case of FTX, U.S. residents cannot trade on its global platform due to strict regulations for the crypto space in the United States. FTX has a U.S. partner, FTX.US, but its offerings are more limited than the global platform.

Ken Lo, co-founder at Hong Kong-based crypto exchange and custodian Hong Kong Digital Asset Exchange, said counterparty risk, which comes from a lack of transparency and information disclosure, underscores the need for “clear regulatory framework and vision statement.” ‘POSTER CHILD’ NO MORE It was only a few months ago that Bankman-Fried, 30, had been seen as a crypto white knight, salvaging beleaguered crypto firms that faltered as prices cratered. “The show must go on, the industry needs to keep growing, but it’s definitely a step-back in itself when you see the poster child of the industry being put in this position,” said Jean-Marie Mognetti, chief executive of crypto asset manager CoinShares. “It is a lesson which seems to keep repeating itself,” he added, citing certain star traders in various companies that ended up in trouble.

While the meltdown would not stop companies from creating new blockchain-based products, Animoca’s Siu said it “probably will create a little bit of a chill effect” for institutional investors entering crypto markets.

To be sure, some investors continued to have faith in the sector and bitcoin, the world’s largest cryptocurrency, rebounded 12.5% to $17,853.

In an interview with CNBC on Thursday, Microstrategy Chairman Michael Saylor said he will continue to acquire bitcoin when the opportunity presents itself. On Wednesday ARK Invest, led by high-profile crypto proponent Cathie Wood, bought shares in FTX rival exchange Coinbase Global. FTX’s snowballing troubles rocked digital currencies on Wednesday. Bitcoin hit a two-year low of $15,632, down about 77% from an all-time peak of $69,000 from November 2021. Ether, the second-largest, hit its lowest level since July before steadying on Thursday.

FTT, the smaller token tied to FTX, plunged. Its market cap dropped to around $360 million, down from around $3 billion at the start of the week, according to CoinGecko data. Max Boonen, co-founder of digital asset liquidity provider B2C2, said FTX’s problems have set the crypto space back by six months. Speaking at the Token2049 crypto conference in London, he suggested that investors will to have to rely more on credit asset managers doing due diligence on private financials.

 

Graphic: Top crypto exchanges by volume Top crypto exchanges by volume https://graphics.reuters.com/FINTECH-CRYPTO/jnpwygnndpw/chart.png

 

 

(Reporting by Gertrude Chavez-Dreyfuss in New York; Additional reporting by Georgina Lee in Hong Kong; Editing by Alden Bentley, Catherine Evans and Matthew Lewis)

 

Uma Rajagopal has been managing the posting of content for multiple platforms since 2021, including Global Banking & Finance Review, Asset Digest, Biz Dispatch, Blockchain Tribune, Business Express, Brands Journal, Companies Digest, Economy Standard, Entrepreneur Tribune, Finance Digest, Fintech Herald, Global Islamic Finance Magazine, International Releases, Online World News, Luxury Adviser, Palmbay Herald, Startup Observer, Technology Dispatch, Trading Herald, and Wealth Tribune. Her role ensures that content is published accurately and efficiently across these diverse publications.

Global Banking & Finance Review

 

Why waste money on news and opinions when you can access them for free?

Take advantage of our newsletter subscription and stay informed on the go!


By submitting this form, you are consenting to receive marketing emails from: . You can revoke your consent to receive emails at any time by using the SafeUnsubscribe® link, found at the bottom of every email. Emails are serviced by Constant Contact

Recent Post