The cryptocurrency market continues to recover from the hard blow of the FTX debacle. After a weekend in which they extended losses and where Bitcoin (BTC) fell back below $16,000, the queen cryptocurrency has launched a bid for $17,000 after the opening in Europe. Ethereum (ETH), follows a similar path and seeks to recover $1,300 after falling back below $1,200.
The news about the bankruptcy of the exchange, founded by Sam Bankman-Fried, continues. The latest news is that Alameda Research, a sister fund of the exchange, borrowed billions in funds from FTX clients to trade with them. According to a source familiar with the firm’s operations, Bankman-Fried underestimated the liquidity his firm would need to meet payments to clients.
“It’s very hard to believe that a person who hobnobbed with the likes of Tony Blair and Bill Clinton and contributed numerous donors to the Biden administration’s party could do something like this. Now it’s clear that regulators are not going to stand idly by while FTX plays with client funds, and this is going to bring a new wave of regulation in the unregulated market,” explained Naeem Aslam, chief market analyst at AvaTrade, as he believes the markets “are still in shock that Ponzi schemes can still take place at that level.”
“FTX had $900 million in liquid assets the day before its fall versus $9 billion in liabilities. This is something that could never have happened in a traditional, regulated financial institution,” noted Ipek Ozkardeskaya, senior analyst at Swissquote Bank. “What will probably happen from now on is that people will do what the regulators didn’t do: monitor the balance sheets of crypto exchanges,” he added.
What is certain is that the main players in the ‘crypto’ sector have urged the authorities to establish clear regulation for the companies. This is the case of Brian Armstrong, CEO and co-founder of Coinbase, who has pointed out that a large part of this unfortunate incident is due to the fact that “FTX.com was an offshore exchange not regulated by the SEC“.
“The problem is that the SEC failed to create regulatory clarity here in the U.S., so many U.S. investors (and 95% of trading activity) moved offshore. Punishing US companies for that makes no sense,” Armstrong indicated in response to a tweet from Democratic Senator Elizabeth Warren in which she called for “more aggressive” regulation of these companies.
“We may not be done with the accounting crisis for cryptocurrency exchanges yet. If regulators don’t do their job, and people do it for them, then we will enter a new phase of decentralized finance,” Ozkardeskaya added.
Be that as it may, the future does not bode well for cryptos. Experts such as those at JP Morgan predict that Bitcoin could fall to $13,000, while others fear a “domino effect” following the FTX bankruptcy.
“Investors should understand that events like FTX or Luna crashes will only drive more bad people out of the system. This means traders should pay attention to fundamentals that are likely to improve. Yes, institutional investors may delay their participation as they will be looking for more involvement from regulators, but many will also be excited about the current price action and the opportunity it presents,” commented Aslam. As they say: when a door closes, a window opens.
As for the rest of the altcoins market, Ripple (XRP) fell 2% in the last 24 hours. Dogecoin (DOGE) trades practically flat and Cardano (ADA) rallies slightly. Polygon (MATIC) threatens to conquer the dollar and Solana (SOL) scores a 5% gain in the last day after losing more than half of its value during the worst moments of last week.