Crypto was starting to take a break — until it wasn’t.
One of the largest and fastest growing cryptocurrency exchanges went bankrupt last week, sending prices of cryptocurrencies recovering from a downturn also down. Bitcoin After about a month of new lows, previously trending upwards, the FTX collapse quickly pushed the token below $17,000. This is the price he hasn’t seen in 2 years. of Ethereum Prices followed a similar downward trend, returning to the low $1,200s as of Friday morning.
The impact of FTX’s bankruptcy doesn’t stop there. Its implosion is affecting the entire crypto world. One example is his BlockFi, a major cryptocurrency lender preparing for potential bankruptcy. wall street journalGenesis Global Trading, the lending arm of cryptocurrency platform Gemini, has also suspended new loan originations and redemptions following the FTX bankruptcy.
Ben McMillan, CIO of IDX Digital Assets, a cryptocurrency asset management firm, is the digital asset space. “Once the leverage is wiped out, it leaves a big void. Players like this can beat a lot of other people in that ecosystem.”
Crypto investors on the FTX platform are seeing their accounts frozen and unable to withdraw funds. Investors outside of these ecosystems are also unsafe and have witnessed significant declines in the value of crypto assets. Here’s what investors should know and do as the FTX epidemic continues.
Where Crypto Goes After FTX Collapses
The future is uncertain.
No one can predict where the price will go, just as no one could have predicted FTX’s sudden crash.the market is already crypto winterand FTX’s bankruptcy may only prolong and exacerbate the freeze, but probably not as long as you might think.
“An immediate contagion doesn’t necessarily mean it will last more than a month or two in the industry,” McMillan said. “But I think this could weaken some of the risk appetite in this area, especially given the macro context.”
McMillan believes FTX’s failure will ultimately prevent major players from entering the crypto space until at least 2023. For smaller investors, these new lows may offer a potential entry point, but that entry point carries significant risk.
On the heels of FTX, the value of both Bitcoin and Ethereum plummeted by more than 20% last week, with Bitcoin in particular hitting a two-year low. The question is whether this will be the ultimate low before the next bull market. But again, there is no way to say definitively.
“Cryptocurrencies are weakening as risk appetite has just left the building,” wrote Edward Moya, senior market analyst at Oanda. market pulse.
“We’ll be talking a lot about FTX in the coming months, but it’s when Binance, Coinbase, Lbank, or Consbit run out of liquidity that they move cryptocurrencies. A lot of bad news is woven into it. As such, for Bitcoin to fall below its recent lows, it may require another bankruptcy of a major cryptocurrency company or a risk-averse move on Wall Street.
More institutional bankruptcies means worse price action for investors. Especially as risk appetite declines during this time of economic upheaval.
What Crypto Investors Should Do
This is a good time to do some research.
The collapse of FTX highlights the risks of investing in the cryptocurrency market. Even a seemingly good exchange can suddenly freeze all your accounts and make it impossible to withdraw funds. Therefore, we recommend that you carefully read and understand the terms and conditions and user agreements of your exchange and wallet (if any).
Speaking of crypto walletIf you don’t have one, now might be a good time to consider getting one. Cold wallets are the most secure because they keep your crypto offline on a hardware device like a USB drive. Hot wallets, by contrast, can be accessed online. The downside is that the private key is usually known to her website owner, which makes the key more vulnerable.
Unfortunately insurance is not your hero if something goes wrong with your exchange.Most exchange insurance policies will not cover you if the exchange goes bankrupt. Most policies cover only some criminal events such as fraud and theft.
Experts recommend investing only 3-5% of your investment portfolio in cryptocurrencies. This is due to their high risk tolerance. Additionally, the last two weeks have shown that price volatility isn’t the only thing that adds risk to your crypto portfolio, so you should only invest in what you can afford to lose.