‘Holy sh*t! Does Bitcoin fix this?’ Australian crypto industry reaction to FTX implosion turmoil
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As you’re probably only too aware, the crypto market tanked overnight (AEDT) on the news the world’s second-biggest crypto exchange, FTX, has all but imploded due to a bank-run-style event and overexposure to its very own token (FTT).
A takeover now appears to be on the cards in a possible deal between FTX and larger exchange Binance.
It’s an evolving story, much like your fluctuating crypto portfolio. (If you’re still invested that is and haven’t thrown your phone or laptop against a wall in disgust.)
Not quite up to date with all this? You can read a fair bit about what’s gone down in our morning summary on matters, here.
For this article, however, we’ve tracked down some commentary from a few of Australia’s leading crypto experts from exchanges CoinJar, eToro, comparison site Finder and Web3 gaming title Illuvium.
Opening the batting is Luke Ryan, the always frank, always insightful CoinJar Head of Content…
“My first thought on it all is: Holy sh*t!” Ryan told Stockhead late this morning.
We could almost leave it there, actually, as it pretty much sums things up perfectly. You’ll get a bit more from his broader thoughts, though:
“The overnight collapse of the world’s second-largest exchange leaves the entire crypto market uncomfortably in the hands of one man: CZ,” continued Ryan, referencing Binance CEO Changpeng Zhao.
“If he goes through with the deal [the proposed Binance takeover of FTX currently agreed to in principle by both CZ and FTX CEO Sam Bankman-Fried] and honours 1:1 redemptions, then maybe all we’ll be left with is a horrendously monopolistic exchange ecosystem.
“If he doesn’t, then expect crypto contagion 2.0 as we discover which exchanges were parking their trading capital on FTX and how exposed they are. Either way, not a great day for crypto in general. Does Bitcoin fix this?”
“What we’re seeing with crypto is another black swan event with the FTX and Binance bid,” believes eToro market analyst Josh Gilbert.
“It’s very similar to the collapse of Luna or Celsius Network earlier in the year and these types of unanticipated events show that it’s an asset class that’s still maturing.”
Gilbert believes that Bitcoin and all other crypto assets will likely remain under pressure until more clarity around the FTX-related fallout emerges.
He is, however, optimistic that the industry will learn from this as well as some of the other “major blunders” seen in the industry this year. It will “almost certainly lead to more transparency across the space long-term, helping to bring more accountability and trust,” he said.
“It’s likely companies such as FTX will see more scrutiny from regulators, which is understandable when dealing with retail investors’ capital.”
Gilbert also expressed hope that such crypto regulatory oversight will find a balance between investor protection and supporting the desire to participate in a technology that “can deliver real benefits” to financial services and “facilitate greater financial inclusion globally”, adding:
“We fully support regulatory measures that are being explored, especially when it comes to educating and protecting investors.”
We’ve also received a lot of insight today via email from crypto expert James O’Donoghue from Finder Ventures.
First up, O’Donoghue emphasised that the overarching FTX story is live, unfolding and that nothing is particularly certain yet, but he was prepared to speak to broader themes.
“What does seem certain, is that this is largely a fear-driven event, catalysed by what’s been an eventful year of painful lessons for many,” said the Finder exec.
Referencing the CoinDesk-highlighted asset/liability mismatch on the balance sheet of Alameda (FTX boss Sam Bankman-Fried’s trading/venture firm), O’Donoghue pointed to the fears that many seem to have regarding hypothetical Alameda defaults that could have potential to impact the balances of customers using the FTX platform.
“The market was quick to respond on the backdrop of other collapses still well within recent memory,” noted O’Donoghue, “which has enshrined the behaviour that the only sound strategy when things appear shaky is a simple one. Run fast.”
‘No industry operates on the speed of information like crypto.’
“One thing we know is that, unlike traditional finance, no industry operates on the speed of information like crypto. The ecosystem is deeply rooted on real-time platforms like Twitter and social messaging apps like Telegram, WhatsApp, Discord etc, where people are spreading the view and thoughts of the day in real time.”
This is an on-point observation from the Finder expert, as we know full well how volatile as space Crypto Twitter is, for instance. It really is a never-ending soupy mush of mood-swinging emotions on there. Entertaining and often very informative, too, however.
“This is perhaps a unique driver to why crypto companies are especially exposed to fear-driven events,” he added. “News travels faster than any industry before it.
“Side note: I believe this issue is not that FTX lent / allocated out customer funds, it’s that they borrowed against the FTT token, which itself could be poor collateral, which means a default could spark contagion into the exchange. But as above two points, things move faster than the market can get deep insight / data into.
O’Donoghue also spoke to how the FTX drama could affect the crypto regulation narrative. Overall, he believes it will “likely damage regulatory progress in the US”, at least in the sense of how favourable it is toward cryptocurrencies, their treatment, and in “balancing regulation over centralised companies vs decentralised platforms”.
“Perhaps some will rejoice that FTX may not have the influence it has had, with a view this will better protect the decentralised parts of the ecosystem, however the truth is that the regulatory development and deployment will still occur, with-or-without their voice in the mix.
“I feel we need more input from crypto-focused leaders, not less, regardless of their perfections on every aspect. So I’m left thinking of this as a net loss for the industry if FTX does in-fact face acquisition or similar.
“While not alone, they were largely on-side in educating regulators and contributing to a balanced framework, with others fighting to ensure the protection of areas their focus lacked.”
We also grabbed a quick take via a Telegram chat late in the day with Kieran Warwick – the co-founder of Illuvium, one of the most prominent gaming titles in the space.
“The whole situation is shocking,” Warwick told Stockhead, adding:
“It’s still early days, and we are still yet to see an official statement about what went wrong from Sam or FTX officials. But I just hope it doesn’t come out that they were deploying capital to Alameda or other entities without consent.
“That would be a complete sh*t show.
“Whatever happens, however the market is affected, we’ll just keep continuing to build the biggest game in Web3.”
Here are a few further Aussie crypto-industry takes we’ve spotted on Twitter today.
Kraken Australia’s managing director Jonathon Miller:
— Jonathon Miller (@jdesmondmiller) November 8, 2022
Australian Ethereum educator Anthony Sassano:
CZ bodies SBF and then SBF *thanks him* for doing it
What a world pic.twitter.com/lKhnKuGftQ
— sassal.eth 🦇🔊 (@sassal0x) November 8, 2022
Collective Shift’s Ben Simpson:
Get your money off exchanges.
Buy a ledger.
— Ben Simpson (@bensimpsonau) November 8, 2022
⏰🚨 What's Happening With FTX, Binance & Alameda
Recap of the events, why it matters and what happens next. https://t.co/aTYRdpL05W
— Collective Shift (@cshift_io) November 8, 2022
Trader extraordinaire Eunice Wong:
Groundhog Day at its best.#FTX is Luna 2.0 aka LUNC
Assuming the same endings, I’m expecting new issued token FTXC pic.twitter.com/jngTFfv5av
— Eunice D Wong (@Eunicedwong) November 8, 2022
1. Never leave funds in an exchange when not trading
2. Never stake coins anything that has lockups or ridiculously high APY
3. ANYTHING can happen
4. Don’t be cocky
5. You can be from hero to zero in matter of seconds
6. No HODL
— Eunice D Wong (@Eunicedwong) November 8, 2022
2/ Second, Coinbase doesn't have any material exposure to FTX or FTT (and no exposure to Alameda).
— Brian Armstrong (@brian_armstrong) November 8, 2022