The collapse of the FTX exchange is another "black swan" event that has appeared in the world of cryptocurrencies. However, this does not mean the end of digital assets, especially those built on solid foundations like Bitcoin. This largest virtual currency in the world once again faces significant drops, but after them, it always bounced back, often breaking its records. The move of investors, including traditional banks, which continue to invest in blockchain-based technology, proves that the situation may be similar in the near future.
The crisis in the crypto market caused by the November bankruptcy of FTX, Alameda Research and several other cryptographic companies shook the position of the most popular digital market in the world. Bitcoin lost about 25% of its value. In November, its exchange rate fell from USD 21,000 to below USD 16,000 in just a few days and has stabilized at this level for several days. According to CoinMarketCap, the turmoil wiped out nearly $200 billion from cryptocurrency markets. The total market capitalization was over $1 trillion earlier this month and is now slightly over $800 billion.
– This is a severe loss, and such a significant drop in the price cannot please investors. However, Bitcoin rubs against its exchange rate bottom, and as history shows, this cryptocurrency regained its position after each such collapse. Bitcoin is built on solid foundations and is not an "artificial" creation like some smaller cryptocurrencies or tokens - emphasizes Marcin Wituś, president of the board of Geco Capital OU, a company managing an investment fund operating on the cryptocurrency market.
Bitcoin does not like "black swan" events but has learned to live with them.
Examples? In March 2020, Bitcoin lost up to 50% of its value. It was caused by panic in the financial market after the outbreak of the Covid-19 pandemic. However, in November 2021, the world's largest digital currency rose to a record high of $69,000. Some investors realized their profits at this point, which inevitably led to a price correction. There were more "black swans", i.e. severe crises in the world of cryptocurrencies, including the bankruptcy of the Mt Gox exchange in 2014 or the hacking of the Bitfinex exchange in 2016. At that time, the rates also fell to deficient levels.
In recent weeks, investors' caution in digital markets has been noticeable, but there has been no panic withdrawal of capital. On the contrary, many financial institutions continue to bet on crypto, such as Man Group, a London Stock Exchange-listed hedge fund with assets under management of up to $150 billion. In addition to traditional assets, Man Group also wants to deal with alternative funds, including digital assets, hence the decision to add another service to the portfolio.
"Why no fear?" I would compare it to investing in traditional financial assets. After all, the greatest economic crashes in the history of the world concerned the collapse of banks and even entire countries. There are no financial assets in which investing is completely risk-free. A sensible investor diversifies his portfolio and builds it on the basis of high-class assets. Bitcoin is such an asset today, and further actions of financial institutions confirm its value - emphasizes Marcin Wituś from Geco Capital OU, which - operating under an Estonian license - manages alternative funds.
Who invests in the world of cryptocurrencies? For example, JP Morgan, the most prominent American bank in terms of assets, announced after the situation with the collapse of FTX that it intends to provide bitcoin and other cryptocurrency exchange services. They created the product "JP Morgan Wallet", which has already been registered by the United States Patent and Trademark Office. As part of the service, transfers of virtual currency and its exchange - and cross-border- processing of cryptocurrency payments and other financial services will be available. It is an extension of the cryptocurrency offer because, in August last year, JPMorgan offered its clients the opportunity to invest in the New York Digital Investment Group cryptocurrency fund, and earlier, the bank provided its clients with access to the Osprey Funds fund and four others created by Grayscale, i.e. the largest institutional investor in bitcoin.
Interestingly, the president of the JP Morgan bank himself openly criticizes bitcoin. So why isn't the US's largest banking institution turning its back on digital currency?
– The answer seems simple, the bank's analysts recognize that these are high-class assets, and it is worth having them in your portfolio. So why are the negative statements coming from the banking sector? 'attack is the best form of defence' - comments Marcin Wituś from Geco Capital OU.
Many banks face accusations of participating in money laundering, which is cash trading, the most commonly used form of payment for criminal activity.
– On the other hand, blockchain technology, on which the entire cryptocurrency sector is based, is entirely transparent and allows everyone to track the flow of funds – adds Marcin Wituś from Geco Capital OU.
The crypto world needs to improve, and it will only get better.
Experts argue that bitcoin is close to its exchange rate bottom. Still, even Brad Garlinghouse, the CEO of Ripple, predicts that the cryptocurrency industry may emerge from the ongoing crisis stronger. In order not to remain groundless, a representative of a company that creates solutions for the cryptographic business, including a real-time currency settlement and money transfer system, emphasizes that fund or exchange managers must continue to focus on transparency, creating trust and cooperating in building regulations to protect investors.
The roadmap for such activities was indicated at the Texas Blockchain Summit, one of the largest cryptocurrency fairs in the US, by Lee Bratcher, president of the non-profit organization Texas Blockchain Council. During his speech, he emphasized the need for crypto firms to follow a set of best practices, including stopping customers' money from being inappropriately mixed with other funds and allowing real-time checks on cash and other reserves. He also said it is worth considering storing assets in a more secure way, for example, via a digital wallet not connected to the internet, to increase protection against hacking.
– Taking several measures to protect cryptocurrencies against drastic drops is in the interest of both alternative funds and investors and even national governments because it will limit the undesirable factor of social unrest. It will also positively impact the Bitcoin exchange rate, which, according to, among others, based on historical analyses and assessments of today's investor activities, should soon increase significantly. It is estimated that in 2024 it will exceed the threshold of USD 150,000, i.e., more than double the record ATH so far. However, the first symptoms of a significant improvement will be observed as early as 2023 - emphasizes Marcin Wituś from Geco Capital OU.