Bitcoin had its worst week in two years following the bankruptcy of cryptocurrency exchange FTX last week but can crypto prices rebound this week? The exchange’s CEO, Sam Bankman-Fried, resigned after a series of incidents stemming from concerns about money transferred to his other business, Alameda Research, which also failed last week.
The FTX insolvency has wiped out a sizable portion of the cryptocurrency market. However, the three reasons listed below explain why crypto values will recover.
Reinforces the Core Case for Decentralization
The troubled cryptocurrency exchange revealed that it had been hacked just hours after FTX and its 130 subsidiaries declared bankruptcy and CEO Sam Bankman-Fried resigned. According to Elliptic, a crypto risk management company, the value of the crypto assets could be around $477 million. Furthermore, FTX competitors like Crypto.com have had to reassure worried investors who feared they would also face liquidity issues after the exchange accidentally sent $400 million to the wrong wallet on November 13.
Crypto_com CEO is claiming they “accidentally” sent $400 million of their eth to the wrong wallet.
He’s either lying, or incompetent. https://t.co/hWXvPqBime
— Coffeezilla (@coffeebreak_YT) November 13, 2022
The FTX collapse sparked a debate between DeFi (decentralized finance) and CeFi (centralized finance). Many experts believe that DeFi is preferable in terms of transparency and accuracy, especially in light of the two DeFi lenders that went out of business earlier this year, Celsius and Voyager.
Crypto fund @ARK36_AIF has appointed Anto Paroian as executive director and chief executive
— FundsTech (@FundsTech) September 7, 2022
Anto Paroian, the CEO and executive director of cryptocurrency hedge fund ARK36 explained the fundamental concept of cryptocurrencies. He stated that the goal is to eliminate the need for trust through decentralization. It suggests that decentralized exchanges will become more prevalent in the future, bringing transparency to the sector. As a result, the prices of crypto assets will rise.
Crypto Prices to Recover as Market Participants will Consider Self-custody
Industry experts have encouraged cryptocurrency traders and investors to take custody of their crypto assets in light of the massive market uncertainty caused by the collapse of FTX. On November 13, Changpeng “CZ” Zhao, CEO of Binance, urged the cryptocurrency community to use self-custody crypto wallets to keep their cryptocurrencies. Zhao described self-custody as a “fundamental human right.” He recommended investors start with small amounts to learn the technology and tooling first.
— Krypton AI (@KryptonAi) November 14, 2022
On November 10 and 11, MicroStrategy executive chairman Michael Saylor spoke on the benefits of self-custody in light of the current market environment. Saylor said it takes self-custody to stop influential people from acquiring and abusing their position of authority.
Saylor also claimed that self-custody is crucial for maintaining the reliability and security of blockchains because it improves decentralization. As a result, market participants will now consider self-custody seriously, which will increase demand for crypto assets. It suggests that as interest in self-custody grows, cryptocurrency values will recover.
Regulation is On the Way, Which is a Good Thing
One of the biggest cryptocurrency exchanges in the world, FTX, has collapsed, and it has been called genuinely shocking, an implosion, and a meltdown. Additionally, the situation raised concerns about the stability of cryptocurrencies when bitcoin is struggling. A lack of regulation also leaves millions of investors without a safety net when platforms fail because no one will step in to protect them.
According to Circle CEO Jeremy Allaire, the FTX fall will initiate quicker crypto regulation. In an interview, Allaire talked about how the US needs crypto regulation right away, how offshore crypto businesses are dangerous, and why he thinks the FTX crash might get regulators and policymakers to move faster.
2/ Circle has no material exposure to FTX and Alameda. FTX has been a customer of Circle Payment APIs for the past 18 months, providing card and ACH services for customer transactions. Circle's crypto payments beta product uses FTX and other exchanges, for BTC/ETH liquidity.
— Jeremy Allaire (@jerallaire) November 9, 2022
Furthermore, Changpeng Zhao, CEO of Binance, the company that founded the largest cryptocurrency exchange in the world, has advocated for more regulatory clarification. Zhao told G20 leaders at a conference in Bali that
“we do need to increase the clarity of regulations and the sophistication of regulations in the crypto space.”
The Senate Agriculture Committee, in charge of the CFTC, proposed a new bill earlier this year. The bill would make the CFTC the lead regulator of the digital asset sector and strengthen its authority over crypto spot markets. Additionally, the law would mandate that trading firms register with the CFTC.
Crypto regulations have a potential to boost investor trust, and therefore, they may help the cryptocurrency market recover.
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