The collapse of FTX’s crypto currency commenced on November 11, 2022, and sent shockwaves throughout the industry. Coupled with the US government’s proposal for new regulations to govern crypto exchange, this had a significant impact on the crypto trading frenzy.
As investors became more hesitant to invest, the character of the market shifted over the winter and early spring. The crypto frenzy appeared to have ended as investors adjusted their expectations of the market.
People became more hesitant to sink funds into crypto currency in response to all the controversy, the extreme ups and downs of the market, and the potential for new and stronger government regulation.
What Happened to FTX?
Binance, the world’s largest cryptocurrency exchange platform, engages in the purchase and sale of multiple cryptocurrencies. The company was in talks to buy FTX, its competition.
Those talks came to an end in early November 2022, when Binance backed out of the deal. At that point, Binance released a statement that stated: “As a result of corporate due diligence, as well as the latest news reports regarding mishandled customer funds and alleged US agency investigations, we have decided that we will not pursue the potential acquisition of FTX.com….”
Shortly after the breakdown of talks, FTX founder Sam Bankman-Fried resigned as the CEO. This launched the open collapse of FTX as investors began to withdraw their funds.
As more information came to light about FTX’s trading arm, Alameda Research Company, alarms were raised about the previous CEO’s possible mishandling of funds. On December 12, 2022, Bankman-Fried was arrested for fraud, conspiracy, money laundering, and multiple other criminal charges that have since been added.
The Ebb and Flow of the Crypto Market
The crypto market was accustomed to the ebbs and flows of various currencies. Bitcoin, the behemoth of crypto, hit an all-time high of about $65k per coin in November 2021, but began to fall precipitously in the wake of rumors of greater government regulation.
After the FTX scandal, Bitcoin’s prices tanked again to around $16k. Since the initial shock wages of FTX’s downfall, Bitcoin has leveled out around $30k and remained fairly steady.
Some experts speculate that the higher interest rates set by the Fed, accompanied by an SEC allegation that Binance was evading U.S. securities law through the commingling of customers’ funds, have hindered a full crypto recovery. Crypto currency in general has been a volatile market from the beginning, but individuals are hopeful that it will again rise to the levels it once achieved.
The Potential Return of Crypto
The ups and downs of the crypto market have been extreme and inarguably affected by an uncertain economy in uncertain times. As governments continue to make decisions about regulation of the currency, and large markets choose to adopt crypto, we may see a resurgence in its value.
Other facets with the potential to create an impact are exchange-traded funds, and countries that choose to adopt digital currencies as a legal form of payment. A court already ruled in early July that crypto tokens are not unregistered securities. That decision alone led Coinbase Global shares to increase by 25%.
If governments and large markets proceed to accept crypto as a legitimate form of currency, we may witness a resurgence of its value across the board.
More Secure Investments
Among individuals who seek more secure investments, crypto currency is not likely to be the answer. Too many questions, concerns, potential regulations, and controversies have yet to be sorted out.
For anyone looking for a more stable investment, the S&P 500 index has an average ROI of 10% every year. This has been true for the past 100 years.
Also, many companies place their investments into assets that will benefit their business over the long as well as short term. Any speculation in digital currency is not apt to be as fruitful as investing in digital apps and software that can make their operations run more efficiently.
When your company invests in the digitization of processes and systems, it may gain a timely ROI that works for you and your customers, and empowers you to streamline your business and build it more effectively.
Many questions remain to be addressed with regard to crypto currency. It has a shaky past and uncertain future. Whether crypto will become more solidly established in the future has yet to be determined.
Fortunately, other proven investments are more stable and secure, and they allow individuals and business owners to expand both their investment portfolios and operations.