2021-11-09 This is an article published by Carolin Rainer of DerBrutkasten
Today is a Nine Eleven for the crypto industry The possible takeover of crypto giant Binance by FTX is currently stirring the market. Representatives of the Austrian crypto scene explained to DerBrutkasten what lessons should be learned from the developments and what this means for the regulatory framework of the crypto industry. The FTX takeover of Binance seems less likely. According to reports from Coindesk, the company has decided against an acquisition after reviewing the crypto trading venue so far.
The news surrounding the world's third-largest crypto exchange is currently stirring the industry. On Tuesday, the trading venue FTX announced that it would have to sell large parts of its company to prevent a bank run and an associated liquidity crisis. The distress sale was to go to competitor Binance, which also announced the partial takeover via Twitter.
However, the developments did not only have an impact on FTX customers, but on the entire market. The oldest cryptocurrency, Bitcoin, fell to around 17,000 dollars - its lowest level in two years. By comparison, Bitcoin reached its all-time high of 69,000 dollars in November 2021. And the Fear and Greed Index, which measures sentiment on the Bitcoin market, is currently at 29 and thus in the "Fear" range. Other currencies followed suit. The second-largest cryptocurrency, Ethereum, also briefly fell below 1,300 dollars. DerBrutkasten asked the Austrian crypto scene what the current developments mean for investors, whether the fire sale was foreseeable and what role the topic of regulation plays here.
A "Black Wednesday" for the crypto world "Actually, we should be jumping for joy," declares blockchain expert Robert Schwertner, aka CryptoRobby, with regard to the crypto market bailout. Binance is saving FTX from going under and investor:in cryptocurrencies would be secured as a result. "FTX is huge. In the banking industry, it's called 'systemically important'. There was even a Lehman moment on Twitter yesterday," he says, describing his observations. Nevertheless, looking at the current market situation, he says, one can see that not everyone is happy about the bailout. CryptoRobby ultimately dubs today, 9 November 2022, as Black Wednesday for the industry. Due to the violent crash of Bitcoin and Co. to new lows, today is "a Nine Eleven for the crypto industry", Schwertner said.
"Today is of course insane for the prices," Jonas Jünger, CEO of the crypto custody platform Kiprion, also confirms with regard to the market developments. Like many others, he was faced with the decision of whether to sell his own FTX tokens a few days ago. After FTX founder Bankman-Fried assured him via Twitter that the funds were safe, he trusted him and did not sell. His learning: you can't rely on that at all. "In my opinion, this shows that as an investor, you have to pay even more attention to where the tokens are located, which hedges you get, which insurances there are with the respective platform, etc. You have to pay much more attention to the due diligence. You have to do a lot more due diligence," Jünger says.
The crypto scene is sticking together In his opinion, however, the fact that Binance wants to take over FTX is a strong sign for the crypto industry. Although in the past the founders of Binance and FTX had publicly fought out their conflicts on Twitter, in this serious case they jumped over their shadows to act in the interests of the investors. "If the two options were: Either FTX goes bankrupt or FTX is acquired, then the acquisition is clearly the better option for investors. I am convinced that the industry has worked for the interests of the users here," Jünger explains in the brutkasten interview.
"You have to be aware of the risk" Blockchain expert Andreas Freitag works, among other things, as a consultant for the crypto start-up Kiprion and summarises the important lessons he has learned from the current situation on the crypto market in the brutkasten interview. An exchange always has a certain risk and accordingly investors have to be aware of this risk when they invest in DeFi protocols or tokens from providers. In his opinion, a certain basic knowledge about different assets is important. "For example, if you don't understand the difference between fundamental assets like Bitcoin or Ether on the one hand and tokens based on DeFi protocols on the other, you should stay away from them. But that doesn't mean that the mainstream can't or shouldn't get involved in the crypto market. Personally, I'm more of a fan of simple crypto investments anyway," says Freitag.
Where did Binance get the money? In view of the current crypto winter and the difficult times that many crypto companies are currently going through, however, CryptoRobby also expresses scepticism about Binance's role.
In the crypto community, people would ask where the company got the money for the FTX bailout. "Three weeks ago, the news was circulating that Binance founder Changpeng Zhao was helping Elon Musk out with a €500m loan to buy Twitter. Now he is taking over an ailing crypto exchange for several billion dollars? While other crypto exchanges come under pressure, Binance remains unscathed? That's hard to believe," CryptoRobby notes. (REMARK: Finally it turned out the next day Binance will not save FTX)
For him, it is clear that high volatility is to be expected on the crypto market in the coming weeks. Moreover, should Binance come under pressure or even go bankrupt, the cryptocurrency Bitcoin will also come under heavy pressure, the blockchain expert is certain. "Then prices below 10,000 euros are conceivable," he suspects.
Will the market shakeout continue? Andreas Freitag, on the other hand, takes an even broader look into the future and assumes that the current price movements will be forgotten by investors in a few months. However, it is also clear to him that FTX was not the last stock exchange to come under such pressure. "I was aware that Celsius, with all the DeFi madness, is not the first and not the last company to blow up. We will continue to see some market shakeouts in this sector in the future," says Freitag.
Jonas Jünger sees it a bit differently. "I don't think FTX has anything to do with a shakeout. I think it was already completed before with Celsius and Co.", says the founder. However, he does not hope that the current crypto winter could continue for several years - as many in the scene suspect: "For the sake of the crypto scene alone, I don't hope so. After all, what startup would survive for three years without revenue now?"
What it means for the regulatory framework Looking at the regulatory framework, Andreas Freitag stresses that the current case of FTX and Binance was not a regulatory problem. "I think this was a classic bank run. It apparently had nothing to do with a scam, but simply with a sell-off that overtook FTX," explains Freitag. In general, he and Jonas Jünger see the topic of regulations very positively. It creates legal certainty: "Maybe regulation is not part of the problem, but it can be part of the solution. Personally, I assume that regulations will rightly be increased as a result of such events," Jünger assumes.
Moreover, the monopoly position of the last big trading venues is particularly interesting now, Andreas Freitag emphasises in the interview. "With a view to monopoly laws, it remains exciting whether it will actually be so easy for Binance and FTX to merge," he concludes.
Original article here