Will Crypto Ever Recover?

February 26, 2024

The crypto market is volatile; if the right moves are made, profit has excellent potential, but Crypto is a high-risk, high-reward venture. There is the potential to make 200% or more on a single investment and the possibility of losing all of your capital in one of many scandals and scams in the crypto space.

FTX Scandal

The FTX fiasco is the most significant case in the Crypto market.
The rapid downfall of cryptocurrency exchange FTX in 2022 has had significant repercussions throughout the cryptocurrency industry, fostering widespread distrust among the public and causing the collapse of other associated cryptocurrency services. During its demise, FTX held the position of the third-largest crypto exchange.

The aftermath of this collapse will have long-lasting effects as investors, legal entities, and regulators grapple with recovering lost funds and implementing measures to prevent similar catastrophes in the future. Gain insights into the issues that led to FTX’s downfall, including the involvement of its founder and former CEO, Sam Bankman-Fried.

FTX’s downfall unfolded in early November 2022 following reports by CoinDesk that an affiliated trading firm, Alameda Research, derived a significant portion of its value from speculative cryptocurrency tokens. Concerns about this questionable financial valuation practice and the unusually close relationship with Alameda triggered customer withdrawals. This, in turn, led to the bankruptcy of both FTX and Alameda, causing a seismic impact on the volatile crypto market, which experienced a loss of billions and dropped below a $1 trillion valuation.

In December 2022, the U.S. government filed civil and criminal charges against Sam Bankman-Fried and top executives, accusing them of misappropriating over $8 billion in customer deposits. The charges also included laying the groundwork for insolvency and generating false financial statements inflated with niche token holdings to mask the financial shortfall. Bankman-Fried faced trial in October 2023 and was convicted in November 2023 on criminal charges. He was extradited from The Bahamas to the U.S., with one charge dropped in July 2023. Another trial is scheduled for March 2024 on charges filed post-extradition.
Several other primary cryptocurrency services faced closure and regulatory scrutiny due to their risky financial associations with FTX and Alameda.

The collapse of FTX transpired over ten days in November 2022, triggered by a revelation from CoinDesk that Alameda Research primarily held assets in FTT and other tokens created and controlled by FTX and its insiders.

Instead of having traditional fiat currency or widely accepted cryptocurrencies, this disclosure prompted a massive withdrawal of funds, rendering FTX insolvent and leading to its bankruptcy. The incident raised concerns about FTX’s overreliance on Alameda Research, precarious financial accounting practices, and associated financial management risks. Of course, these events rocked the market, and the inevitable crypto crash ensued. Bitcoin’s average closing price in December 2022 was $16,949.61. Compare this to November 2021, when Bitcoin reached an all-time high price of $69,044.

The Aftermath And Market Recovery

After the crash, the crypto market moved sideways for some time. The space wasn’t dead, but the hype and hysteria had gone, and crypto Twitter became a ghost town.

By July 2023, market recovery had begun; after steadily climbing from March to June, things took off again in July. The average closing price for Bitcoin (BTC) in July 2023 was $30,057.47, almost double the price the asset was worth in December 2022.

Bitcoin ETF Approval

Over a decade since the initial application, spot Bitcoin exchange-traded funds (ETFs) finally debuted in the United States in January 2024. Bitcoin’s path toward becoming a central player in the global financial system has been marked by numerous milestones, such as the inception of the first exchanges, the introduction of derivative products, and the initiation of loans backed by Bitcoin collateral. While daily market dynamics may sometimes overshadow these developments, the recent launch of Bitcoin ETFs is recognised as a significant stride in advancing the maturation of the emerging crypto asset class.

What is the Bitcoin ETF

A bitcoin exchange-traded fund (ETF) serves as a financial instrument, enabling investors to track bitcoin’s price fluctuations without directly owning the underlying asset. The shares of a bitcoin ETF are traded on conventional stock exchanges, providing investors with a more accessible avenue to engage in the cryptocurrency market.

Crypto’s Future

At present, the crypto market is in a much healthier place. The Bullrun hasn’t officially been confirmed yet, but Bitcoin’s current price at the time of writing is $51,820.10. The sentiment is changing, and retail is increasingly interested in the crypto markets. So, to answer the question stated in this article headline. Yes, Crypto will recover, and it has already made great strides.