The FTX collapse has many victims. Millions of people around the world have been affected, and bringing users’ trust into the crypto space will be harder than ever. This event caused a massive surge in sales of Trezor wallets and other hardware or software wallets.
People even see this almost like a Lehman Brothers moment, taking the whole industry underwater. What was once a huge crypto exchange worth $32 billion is now bankrupt. A man who was once seen as the next JP Morgan is now the most hated man in the crypto space.
Things will change forever for crypto
SBF explaining to the customers where are their funds#cramer #sbf #FTX #ftt pic.twitter.com/SMeZ79lyRV
— Investro.com (@investrocom) November 15, 2022
There are many rumors about how FTX messed it all up, but one thing is certain. FTX, along with Alameda Research, were lying about their financial status and had much more liabilities than assets on their balance sheets. FTX was mishandling the funds of millions of customers.
Related article: Kraken and others join the “proof-of-reserves” run
This created great outrage in the space, causing a run on crypto exchanges. What Changpeng Zhao (CZ), the CEO of Binance, started, now other crypto exchanges must follow. Insufficient regulatory control over the companies is what caused the turmoil and will change the industry forever. The largest crypto exchanges will have to be audited and show their proof of reserves.
This is important because the exchange needs to have funds in case of mass withdrawals from the platform. CZ suggested that being overcollateralized is the right way to function as a cryptocurrency exchange.
8 billion people will use crypto in a few years.
— CZ 🔶 BNB (@cz_binance) November 15, 2022
CZ is so certain about crypto that he recently tweeted that the whole planet will use cryptocurrencies in a few years. He is taking drastic measures to save the industry. For example, CZ said Binance is working on creating a recovery fund to avoid negative effects like the FTX crash.
“To reduce further cascading negative effects of FTX, Binance is forming an industry recovery fund, to help projects who are otherwise strong, but in a liquidity crisis,” CZ tweeted.
Kris Marszalek, the CEO of Crypto.com, also supports the crypto space and defends his company in a recent video from Squawk Box. He stated Cronos is an open-source, decentralized project with 400 different projects building on top of it, having billions of dollars in reserves.
“We’ve never utilized it in a way like FTX did. We are a simple business, giving access to digital currencies and taking a fee for that,” he said.
The withdrawal queue is down 98% within the last 24 hours.
It remains business as usual at https://t.co/pFc4Pz9nFR.
Kudos to our team who built resilient blockchain infrastructure — operating normally under load.
Onwards!
— Kris | Crypto.com (@kris) November 14, 2022
Michael Saylor, the CEO of MicroStrategy, also had a say in the FTX crash by pointing out that FTX printed their tokens out of thin air thanks to the proof-of-stake (PoS) mechanism. He is a known proponent of Bitcoin, not crypto, so naturally, he supports the proof-of-work (PoW), which is a mechanism used by Bitcoin.
The FTX collapse is an expensive ad for #Bitcoin. Too many good ideas have been pursued by the #Crypto industry in an unethical, unsound, irresponsible fashion. The only viable future is registered digital assets trading on regulated digital exchanges. pic.twitter.com/PkNdj5RmDl
— Michael Saylor⚡️ (@saylor) November 14, 2022
“This is simply a very expensive lesson for the crypto ecosystem, and it shows the difference between crypto and Bitcoin,” Saylor said in a yahoo interview.
Bottom line
Many investors defend crypto, claiming it is growing and improving every year. However, this year was special as several fraudulent projects made it to a billion-dollar club. This is certainly going to bring more regulation into the space, as requested by many.
Also read: Is COIN ready to accelerate amid all the crypto chaos?
This will be a challenging task for the SEC as almost the whole crypto space is decentralized. Making it centralized would lose the purpose of crypto in the first place. Nevertheless, the FTX crash caused such great mistrust in the industry that it will probably take a few years to get back where we were.
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