- Several well-known venture capital and crypto firms are also involved in the FTX issue.
- All users now have an opportunity to consider the issues and rebuild the crypto sector thanks to the demise of FTX.
The year 2022 will be remembered as one of the key and pivotal years in the development of the cryptocurrency market. This year has seen some of the biggest crashes, from the Terra LUNA crash to the most recent collapse of the FTX exchange, which was previously the third-largest cryptocurrency exchange in the world by volume.
When UST lost its peg and fell far below the target price of $1, the former’s problems began in May. Certain traders were able to take advantage of the asset’s algorithmic structure and relationship to LUNA to their advantage and profit from arbitrage trading it. In essence, this quickly reduced the value of both tokens to almost nothing.
In less than 10 days, the formerly $30 billion-plus FTX enterprise lost all of its worth. Wide-ranging effects of FTX’s crash are being felt throughout the whole cryptocurrency market, as exchanges and cryptocurrencies with exposure to FTT or FTX are seeing declining pricing and financial difficulties.
The FTX failure has had an impact on other exchanges, notably Sequoia Capital, Temasek, and other investors who declared that they were reducing their holdings in FTX to zero. BlockFi, a cryptocurrency lending platform, filed for bankruptcy due to its exposure to FTX. Crypto broker Genesis, a division of Digital Currency Group, is on the verge of going out of business due to a liquidity crisis and may not be able to return investors’ money.
Key Factors That Cause Price Declines in Crypto Sector
Although it may take some time for the impact of FTX’s bankruptcy to absorb, the problem won’t end here. Also, the demise of FTX offers a priceless chance for all users, professionals, and policymakers to consider the issues and redefine the cryptocurrency industry. Risky lending, insufficient capital restrictions, and investors’ concerns over past bankruptcies are the main causes of dropping prices in the cryptocurrency market. And Scams, Ponzi schemes, extreme market volatility have all played a role in crypto prices plummeting throughout 2022. There will also be a time when the markets experience a rapid upsurge in growth and vitality.
