Will The Crypto Industry Recover Following the FTX Collapse?

Those that are invested in Cryptocurrency in any way will be used to the ups and downs the digital currency has seen over recent years. We’re well-versed in seeing the headlines of big wins and the stories of even bigger losses, so to many a further collapse leading to a dip in value might not be big news. That said, experts are still bound to have their opinion on the digital currency industry and the big question on everyone’s lips is will the Cryptocurrency industry recover following the FTX Collapse?

What’s Happened?

Although his behaviour over recent weeks might mean that people simply don’t want to listen to Elon Musk, he has warmed investors that they face a long winter. Many people place Cryptocurrency in the category of winter; where prices are in decline and not likely to rise anytime soon. It was thought at one stage that this could soon be over and that we would once again see some rises in terms of Cryptocurrency values but opinions as to whether that is still the case are mixed. 

There are different reasons why Cryptocurrency might be performing in this way, but the collapse of Cryptocurrency exchange FTX certainly hasn’t helped matters. Last week its Chief Executive Sam Bankman-Fried resigned from his post following a series of high-profile accusations. Not only has the FTX exchange filed for bankruptcy but it is thought that some money has been transferred out to his other company – Alameda Research, which also collapsed in recent days. As well as the collapse of the Cryptocurrency exchange, customers are concerned about any investments they held with them and what will happen to the money. 

What Does The Industry Say?

Up until this happened FTX had been considered one of the safest platforms so understandable its collapse has left some investors worried. Although Bitcoin had already seen a dip in value this year this news led to a drop of 65% for the year to date.  Although there are mixed opinions as to whether Bitcoin and other Cryptocurrencies could bounce back, many are worried that it could dip below $10,000 before the end of 2022 – which will be the first time it has been so low since November 2020. 

Although seasoned investors will be used to the ups and downs of Cryptocurrency, many are worried that this could lead to longer-lasting damage than has been seen previously. Many have been moving their investments out of exchanges as a way to try and protect themselves from the same happening to them although with an investment of this nature anything is possible

Some experts agree with Elon Musk that we are likely to see lower values than we have now. Research firm FundStrat’s head of digital asset strategy, Sean Farrell has talked about “lower lows” and that there will be various platforms that will suffer as a result of the FTX collapse. Chief Executive Officer of BitBull Capital agrees saying “The extent of the damage to other companies, funds, exchanges is as yet unknown, and may come to the fore in the weeks to come.”

What Does This Mean For The Future of Cryptocurrency?

Cryptocurrency is still a relatively new addition to the world of financial investments, which means we don’t have a solid track record to look back on. We haven’t seen this situation with Cryptocurrency before which means it is hard to predict what is likely to happen based on previous behaviours. 

The problem is that the FTX collapse has dented people’s confidence which could lead people to look at alternative options when it comes to financial investments. Most people accept that digital currency investment is risky, but when it is the collapse of an exchange that has taken people’s money that is a different situation altogether. 

That said, we are starting to see a more mainstream acceptance of Cryptocurrency and that is something that is bound to help with confidence and future investments. Many countries’ governments have done a lot to support crypto, seeing it as a way to boost their economies, similar to how the gambling industry and PayPal casinos have done in the past. When the likes of Rishi Sunak and other Government officials talk positively about digital currency and things like NFTs, it is going to bring that way of investing money to people that may not have considered it before. Rishi Sunak, when chancellor, had announced his intention “to make the UK a global crypto-assets hub” and even Matt Hancock during his time as Cabinet Minister talked of Bitcoin and how it was due “ to shake the foundations of banking”.

Should You Invest in Cryptocurrency?

As with any financial investment, doing your own research and making up your own mind as to whether it is the right route for you or not is a must. If you are looking for an investment that you can keep in the long term then most agree that your prospects are much more positive. For example, although Elon Musk talked about a long Cryptocurrency winter he has also talked about the fact that he expects Bitcoin to make it in the long run, but that it won’t be something that turns around overnight. 

The truth is that no one knows what the future of Bitcoin and friends looks like, but most are in agreement that if you’re looking for an investment that you can make now and sell in a few weeks for a profit then digital currency probably isn’t the right option for you. Most accept that we’re already in a Crypto winter and whilst there are various opinions as to when it will end, most agree that it won’t be until next year at the earliest.

If you’re asking whether the Crypto industry will recover following the FTX collapse? The answer is that yes, it most probably will but you have to be willing to sit and play the long game rather than expecting a speedy recovery any time soon.