FTX’s collapse left lasting scars on the crypto market.

By Hannah Lang and Elizabeth Howcroft

October ⁣3, 2023 – 3:11 ‌AM PDT

(Reuters) – The global cryptocurrency market remains badly scarred following the tumultuous collapse of crypto exchange FTX and other‌ big players last year, with crypto prices, volumes and venture capital investment well ⁢below their 2021 peaks.

Sam Bankman-Fried, the former CEO of‌ FTX, stands⁤ trial‍ in New York on Tuesday, charged with seven counts of fraud and⁢ conspiracy stemming from the exchange’s abrupt‍ collapse in November 2022. He has pleaded⁣ not guilty.

FTX was ⁢one in⁤ a series of industry meltdowns that sent bitcoin BTC=BTSP crashing⁢ to its lowest price since 2020. While bitcoin and ‍other major tokens have partially recovered, the sector‌ remains far from the fever pitch it hit⁢ in late 2021.

Here are five charts that show how the crypto landscape has ⁤changed.

BITCOIN BLUES

Bitcoin, by far‌ the biggest cryptocurrency and⁤ the chief barometer for crypto market ‌sentiment, ‍has bounced back about 37%‌ since Nov. 1.

The cryptocurrency was riding high ​in​ 2021, hitting a ⁣record $69,000 in‍ November that year. But as central banks began to hike rates⁣ in early ​2022, riskier assets like cryptocurrencies began to feel‌ the pain as investors sought better‍ returns elsewhere.

Bitcoin lost more than 65% of its value last year, pummeled​ by the collapse of stablecoin terraUSD, which led Singapore hedge ‌fund Three Arrows Capital to file for bankruptcy‍ and caused wider⁢ havoc​ in crypto markets.

Several other ⁤companies also collapsed, but the ‌fall of FTX pushed bitcoin⁤ under ⁤$16,000 in November last year. Bitcoin took another hit earlier this year when Silvergate Bank, a popular U.S. partner for crypto companies, said it would shut down.

Still, bitcoin has regained almost⁤ three-quarters of its value this year on interest from major ​financial firms including BlackRock and hopes that interest rate hikes are ending. It was trading on Monday at around $28,089.

“The FTX debacle came at the​ end of an annus horriblis that had already seen a tech sector collapse, sharply ‍higher ⁤interest rates and self-inflicted ⁢industry ‍wounds,” said Ben Laidler, global markets strategist at eToro.

CRUMBLING MARKET CAP

After peaking at $3 trillion in November ⁢2021,‌ the value ‌of the overall crypto market plummeted through 2022, hitting a two-year low of $796 billion as ⁤FTX imploded. It has since clawed back some ground, hovering above $1 trillion ⁣most of ⁤this ‌year.

“The issues with FTX​ have undoubtedly hit confidence in ‌the crypto ecosystem at large,” said Usman​ Ahmad, CEO of Zodia Markets, the crypto exchange of global ⁢bank Standard Chartered STAN.L.

STABILIZING BITCOIN?

Known for its volatility, bitcoin has gained some stability this year.

Yet the⁢ relative calm in​ crypto markets‍ is not necessarily a good thing, said some market participants, noting‌ that many investors are attracted to crypto precisely because of its volatility, which ‌offers opportunities to make ⁤quick profits.

“We expect low to medium volatility over the near-term,” said‍ Anders Kvamme⁢ Jensen, founder of ⁣crypto‌ firm AKJ.

VC CRYPTO BETS TUMBLE

Venture capital‌ (VC) investments⁢ flooded into crypto‌ during its boom year of 2021,‌ and even ‌through 2022. But such bets ​have slowed considerably this year, after⁢ many firms were burnt by the market⁢ meltdown.

U.S.⁤ VC crypto investments totaled $6.12 billion in the ‍first‌ quarter of 2022, but slumped⁢ to just⁤ $870 million in the same⁢ quarter this year, according ⁢to data ⁤firm PitchBook.

“This slowdown wasn’t primarily‍ due to the failure of FTX but was already underway with the collapse of the [terraUSD] ecosystem earlier ⁤in​ the year,” said Robert Le, ⁤senior crypto analyst at Pitchbook.

“Venture investors ‌are now⁣ proceeding with caution,” he added.

VANISHING VOLUMES

Since FTX​ failed, crypto ⁣trading volumes have​ collapsed, causing traders that had been attracted to the market’s ⁣strong liquidity ⁢to pause buying and selling‍ tokens, or exit‍ the market altogether.

In September 2023,​ total monthly volumes across spot and derivative markets fell to $1.4 trillion, down more than 60% from September 2022, according to London-based researcher CCData. Spot markets bore the brunt, ⁢with ​volumes down more than 70% at⁣ $272​ billion.

Derivative volumes, meanwhile, ⁢have fallen by 60% to $1.1 trillion in the 12 months since September 2022.

“The exit ‌of some large market makers ‍post-FTX significantly reduced liquidity which ​has led to⁢ both low trading volumes and low volatility,” said Noelle Acheson,⁣ an economist who closely follows crypto.

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The global cryptocurrency market remains badly scarred following the⁢ tumultuous collapse of crypto exchange‍ FTX and other big players last‍ year

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