In the ever-changing world of cryptocurrency, the events of a year ago continue to leave a lasting impact. Described by some as the “worst day” in their careers, the aftermath of FTX freeze withdrawals marked a pivotal moment in crypto history. Now, a year later, the industry has undergone major transformations.
Market changes
The aftermath of the FTX crash witnessed a departure of dizzying day traders and a reduction of abundant leverage that once drove Bitcoin to its peak. The era of celebrities and influencers endorsing non-fungible tokens (NFTs) and memecoins has also waned. Regulatory bodies worldwide, determined not to be caught off guard, have tightened their grip, with large financial firms such as BlackRock eyeing entry.
Bitcoin, a barometer for the crypto market, has bounced back from the May 2022 stablecoin TerraUSD implosion, signaling a recovery of all losses made during that period. However, some observers warn that memories are short, and the industry remains prone to speculation and lacks sufficient safeguards.
Regulatory scrutiny
The FTX crash prompted global governments to recognize the need for stricter regulations around cryptocurrency. Regulatory bodies such as the US Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) have targeted major exchanges such as Binance, Coinbase and Kraken. The European Union, Hong Kong and Dubai have introduced new regulatory frameworks to curb misconduct and position themselves as crypto industry hubs.
Withdrawal of venture capital
The once-enthusiastic venture capital (VC) support for the crypto industry has seen a rapid retreat following the collapse of FTX. VC funding in the crypto sector fell by 63% in the third quarter of the following year. VC firms that invested heavily in FTX faced criticism for failing to detect the fraud, leading to increased scrutiny and background checks on founders.
Rise of decentralized finance (DeFi)
The demise of FTX, a centralized exchange, has revived interest in decentralized finance (DeFi). Investors have turned their attention to a new breed of DeFi companies focusing on derivatives, structured products, custody and net segregation, and increased transparency around credit. While the total value of cryptocurrencies locked in DeFi applications has rebounded, the collapse of FTX highlighted the risks associated with keeping digital assets on centralized exchanges.
The second act of FTX
Surprisingly, despite its troubled history, FTX may be on the verge of a second act. Three bidders are vying to acquire the remains of FTX and revive the exchange, raising questions about the lessons learned from its previous challenges.