The FTX liquidity crisis and SBF’s resignation from the CEO position have caused dips in the crypto market this week. It remains to be seen who and which company is next. As Kriptokoin.com, we convey the comments of the experts who direct the crypto money markets to you.
The FTX crisis affects the companies it is linked to
The cryptocurrency exchange, valued at over $30 billion, filed for bankruptcy on Friday. What happened at FTX revealed the company’s financial situation. Every detail subsequently took a hit in confidence in the crypto industry. Initial activity Binance announced on Tuesday that it has accepted a potential deal to save rival FTX. But rumors of bankruptcy resulted in the exchange withdrawing its clients $6 billion in just 72 hours.
Afterwards, Binance said they were reviewing FTX’s balance sheet and dropped the deal. After the incident, regulators’ interest in FTX increased even more. The crisis in the stock market brought with it decreases in all cryptocurrencies. People had them compare it to Lehman Brothers, whose collapse in 2008 started the financial crisis.
10 experts talked about the FTX crisis
One of the people talking about the stock market is Larry Summers, a former US Treasury Secretary. Summers, a Harvard economics professor, says:
What’s been going on in the crypto industry over the past few days will scare people and move regulators.
Summers is also assessing whether FTX is at risk of causing a Lehman-type collapse.
It’s a low rate. Because the banking system is better capitalized than before. The Fed is extremely alert. We have more precedent and willingness to leak liquidity, especially after what happened in the early stages of the pandemic.
Carl Icahn, billionaire investor and president of Icahn Enterprises, also offered his ideas:
I think it can go further. This is just one of the dangers you have in our economy.
Mohamed El-Erian, Allianz’s chief economic adviser, cites the amount of irresponsible leverage associated with the FTX crisis:
The good news is that unlike banks they are not part of the payment and settlement system, so we don’t have to worry about major systemic effects. The amount of irresponsible leverage taken, cross ownership of assets. This kind of thing shouldn’t happen. I suspect what they see will keep them awake at night.
Siegel says the FTX crash is therefore not like the Lehman incident
When asked if it bears resemblance to the Lehman crash, Wharton professor Jeremy Siegel said:
As some people say, ‘Is this a Lehman moment if it actually drops?’ No! Because in fact, more than half of the value has already dropped. Obviously, the financial system has survived very well. There is something really important. When Lehman went bankrupt, I had money in money market mutual funds. I had money in banks and every other commodity. And I said to myself, ‘Thank God the Fed is supporting these assets. In the crypto market, we don’t have that.
Binance CEO speaks heavily about bankruptcy
Binance CEO Changpeng Zhao “CZ” said that the cryptocurrency industry has gone back years:
We will gradually see effects with the bankruptcy of FTX. Especially those who are connected to the FTX ecosystem after the collapse will be adversely affected. In addition, the cryptocurrency ecosystem has gone back many years. People’s trust has been lost.
Mike Novogratz, CEO of Galaxy Digital, states that especially the events damaged trust. In his statements, Novogratz stated:
What is left to trust? Markets are all about trust in the system and trust in other counterparties. Also, trust is an old story. In a nutshell, a young charismatic man with messy hair in bermuda shorts has attracted the world’s top 20 investors. He attracted the modifiers and was sort of the leading man of the whole system. In some ways, the problems will continue. Much worse was the infrastructure for people to buy, sell, lend and promote coins. Therefore, there will be setbacks. But all this is not the end of the crypto industry.
Bitcoin maximalist Michael Saylor says regulators will accelerate
Bitcoin bull and Microstrategy founder Michael Saylor states that SBF and the bankrupt exchange will accelerate regulation in the crypto market:
I think the industry needs to grow and regulators are getting into that space. With all this, it will strengthen the hand of regulators and speed up their intervention.
Jeremy Allaire, CEO of fintech Circle, which owns a small stake in FTX, was among the names that spoke. Allaire shared his thoughts on the subject:
This whole market cycle (down) has given us many opportunities to reflect on the deep issues in the market. Lack of transparency, lack of counterparty visibility. Project treasuries and balance sheets tied to speculative tokens are the main reasons. Finally, I have been in this industry for 10 years. A technology that emerged in response to the Lehman Bros moment in 2008. However, it is disappointing that it caused its own sinking version to emerge. We can do better.
Finally, JP Morgan strategists led by Nikolaos Panigirtzoglou say:
Possibly a new margin call, leverage reduction, and crypto company/platform failures are starting. The number of organizations with stronger balance sheets is to bail out those with low capital and high leverage. Shrinking appears in the crypto ecosystem.
