After the Collapse of FTX, Shocking Predictions About the Future of the Cryptocurrency Market

Cryptocurrency prices have declined over the past few days while the Crypto market is witnessing more pressure.

In addition to continuing the US Federal Reserve’s policy of raising interest rates, the crypto market is facing financial scandals that are ravaging investors’ confidence in cryptocurrencies.

The collapse of the FTX crypto exchange and its bankruptcy last November also raised questions about the future of crypto markets and the extent to which they were affected by this incident, especially with the sharp losses witnessed by these currencies in the last year.

Technology experts’ predictions regarding the future of cryptocurrencies and their impact on the resounding fall of FTX, as some expected the collapse of the markets of these currencies in the coming period, affected by the crisis.

Others expected that these currencies would regain their balance and recovery as soon as the economic conditions stabilized and that their decline in recent months was mainly due to the economic fluctuations that various sectors worldwide suffer from.

On the other hand, data from Bitcoin chain analytics firm Glassnode indicated that Binance saw a huge withdrawal of 40,000 BTC on December 12, 2022, with outflows twice as high as those seen in July 2021.

Although the cryptocurrency exchange has enough funds to cover ten times its withdrawals, market sentiment is negative, and investor confidence in cryptocurrencies remains low.

It is noteworthy that 2022 was a bad year for investors in cryptocurrencies, in light of the decline in the market value of most currencies, especially Bitcoin, in addition to the collapse of FTX and the loss of $662 million.

According to reports, the announcement of the founder of Binance, Changpeng Zhao, intentions to acquire FTX and then quickly backing down contributed to the acceleration of the fall of FTX.

The shocks that the crypto market received during the last period brought back the question that arises again: Is the $1 trillion crypto market close to collapse? And what is its future?

 

Huge Withdrawals

Crypto exchange giant Binance witnessed during the past week the exit of about $3.7 billion, which is the largest withdrawal in its history, as reported by CNN on December 14, 2022.

According to blockchain data firm Nansen, Binance saw on December 12, 2022, alone withdrawals of $1.9 billion, which is nearly 18 times higher than the second largest outflow recorded in one day, which Bitfinex has experienced.

Nansen attributed these huge withdrawals to the leaked news of the planned investigation by the US Department of Justice with Binance after the collapse of FTX.

Reuters reported last week that US prosecutors are considering investigating money laundering at Binance by filing criminal charges against individual executives, including its founder, Changpeng Zhao.

In a separate statement, Binance said that US regulators are working on a comprehensive review of all crypto companies.

“The crypto industry has grown rapidly, and Binance has demonstrated its commitment to security and compliance through significant investments in its team, as well as the tools and technology it uses to detect and deter illegal activity,” according to the company’s statement.

The huge withdrawals of funds from the largest crypto exchange came hours after it was announced that FTX founder Sam Bankman-Fried was arrested in the Bahamas and is facing criminal charges in the United States for raising more than $1.8 billion from investors, concealing risks from them, and the relationship of FTX with his trading company.

In turn, the founder of Binance posted a tweet in which he affirmed his confidence in the company’s future outlook, saying: “Ignore fear, uncertainty, and doubts, and continue building.”

Changpeng Zhao declined to respond to any comment inquiring about the reason for the huge withdrawals of billions of dollars from Binance, except that he classified the withdrawals as a stress test.

 

Crypto Winter

The FTX cryptocurrency exchange declared bankruptcy on November 11, 2022, and was considered one of the largest cryptocurrency exchanges, which led to the collapse of its founder’s fortune from about $16 billion to less than $1 billion in just two days.

Those events marked the dramatic collapse of a company that said last year it had more than 5 million users worldwide and traded more than $700 billion in cryptocurrency that year alone, as reported by Bloomberg on December 11, 2022.

Observers believe that the cryptocurrency market is a high-risk market, and its collapse is expected at any moment due to the absence of rules governing this market, regulators or oversight agencies, or risk protection funds that guarantee the investments of companies engaged in trading this type of currency.

The collapse of FTX is the best evidence of the great risk that the cryptocurrency market suffers from, which fell within hours, and its market value decreased in an unprecedented manner without control over this collapse.

Despite the great technology that the company relied on, which is mainly based on blockchain technology, which guarantees data confidentiality and protection from manipulation.

Investors in the crypto industry are already reeling from the so-called crypto winter caused by the collapse of the cryptocurrency Terra Luna last May and the collapse of the FTX exchange last November.

According to what The Economist reported on November 16, 2022, despite the recent era of Binance, which was established in 2017, in digital trading, it was able to occupy a good place among the digital exchanges that already exist, which made many investors trade through it.

The company gained the confidence of many investors from different countries of the world after the great successes it achieved in digital currency trading, and no one cares that the company is new. It also quickly gained great experience, which made it competitive with major companies in this field.

Binance is currently the largest crypto exchange by trade volume for investors, and despite the huge volume of withdrawals that took place through the platform during the past few days, it is still operating at full capacity without any problems or obstacles, which makes its fall very difficult.

 

Unknown Future

On December 5, 2022, the British Standard Chartered bank expected the price of the most popular cryptocurrency Bitcoin to fall to $5,000 over the next year, a decrease of about 70% from its recently recorded levels.

As reported by CNBC, Eric Robertson, head of global research at the bank, said that more cryptocurrency companies and exchanges are finding themselves lacking sufficient liquidity as yields rise and technology stocks fall, which will lead to more bankruptcies and a collapse of investor confidence in the cryptocurrency world.

In addition, about 94% of respondents to the MLIV Pulse survey, published by Bloomberg on December 4, 2022, believe that more setbacks will follow the bankruptcy of FTX as years of easy credit give way to a tougher business and market environment.

In the middle of this year, the correlation of cryptocurrencies with the stock market strengthened, especially with regard to the relationship with inflation rates and interest rate levels in the United States.

However, positive economic data from the US recently positively impacted the crypto market, as Bitcoin returned above its previous yearly lows, with BTC price trading at $17,393.

Bitcoin was trading at about $21,000 before the sudden collapse of FTX, which had painful effects on most sectors of the crypto industry and necessitated an uprising from the regulators in many markets with new calls to regulate the encrypted assets sector, as it witnessed accumulated losses this year.

On her part, US Treasury Secretary Janet Yellen said, during an interview with Bloomberg on December 10, 2022, that the implosion of Sam Bankman-Fried’s FTX crypto empire reinforced her view that the market for digital assets required very careful regulation.

With the Federal Reserve heading to ease the pace of raising interest rates, as hinted by Jerome Powell, the bank’s president, the return of momentum to the crypto market and the recovery of demand for cryptocurrencies began after a year of darkness, and the last time, he limited himself to announcing the implementation of an increase of only 50 basis points, after it was 75 basis points during the previous four meetings.

In turn, Tim Draper, a specialist in venture capital, confirmed, in an interview with the CNBC news channel on December 5, 2022, that he still expects the value of Bitcoin to reach $250,000, despite having pushed the deadline for that price target to June 2023 instead of the end of 2022.

Goldman Sachs also plans to spend tens of millions of dollars to buy or invest in crypto companies, Mathew McDermott, the bank’s head of digital assets, told Reuters on December 6, 2022.

Despite the amount that Goldman Sachs can invest is not large for the Wall Street giant, which recorded profits of $21.6 billion last year, its desire to continue investing with the sector’s setbacks indicates that it sees long-term opportunities.