Crypto world developments for 2023 post FTX fallout. What bitcoin investors should expect going forward and finding new opportunities.
The FTX collapse was the biggest event in crypto in 2022. In a matter of days, the second-largest crypto exchange in the world simply ceased to exist and took out more than $1 billion in customer funds with it.
The ripple effects of FTX’s sudden and dramatic fall are only just beginning. We’ll take a look at 7 ways that we expect the fallout from the FTX will impact the crypto world in 2023.
1. Contagion Will Keep Spreading
“Contagion” was the word on everyone’s lips in the aftermath of Terra Luna’s shocking collapse in May 2022. Now contagion is back, and it could be worse than ever.
FTX had its fingers in a lot of different pots in the crypto world. It was one of the largest backers of the Solana ecosystem. It was in the process of bailing out companies like Voyager Digital, BlockFi, and Celsius Network that went bankrupt in the wake of Terra Luna’s fall. It held millions of dollars in crypto from major crypto firms like Genesis.
Now, the fate of all these companies is up in the air. BlockFi refiled for bankruptcy, with the proceedings set to play out in 2023. Genesis has halted trading and it remains unclear whether the exchange can stay solvent through the winter.
There are fears that more companies, including Genesis’s parent Digital Currency Group, could be the next to catch the contagion from FTX and close shop with little warning.
2. The Crypto Winter Will Continue
2022 was a difficult year for the crypto market, but many analysts were optimistic that 2023 would be better. The FTX collapse has dashed those hopes.
Institutional investors, many of whom were already feeling risk-averse in a bear market, have pulled massive sums of money out of crypto. Venture capital for crypto projects is likely to dry up in the short-term as investors take stock of what happened at FTX.
Going into the end of 2022, the crypto market as a whole is sitting around an $800 billion market cap. That’s a 70% decline from its $3 trillion market cap at the end of 2021. The market might not fall much further in 2023, but it could be another year before it begins to bounce back strongly.
3. Crypto Gambling Will Continue to Shine
There was no part of the crypto world that went completely untouched by FTX’s implosion, but the crypto gambling industry came close. FTX had considered investments in several bitcoin gambling sites to support the industry’s growth, but didn’t pull the trigger before collapsing. In a market in which most other projects are struggling with FTX’s fallout, the crypto gambling industry has a chance to get ahead. The industry has been relatively well-insulated from the crypto winter as well, with numerous new gambling sites opening in 2022.
Heading into 2023, crypto casinos and sportsbooks could be one of the brightest spots in the crypto world. Keep an eye out for new platform openings, more active players, and faster innovation in the crypto gambling space.
4. Binance Will Get Even Bigger
If there were any winners in the FTX debacle, Binance was the biggest. The world’s largest crypto exchange just saw its biggest competitor disappear.
In any 24-hour period, Binance does around $7 billion in trading volume. The next-biggest exchange, Coinbase, does less than $1 billion. Since FTX collapsed, Binance has seen a 30% growth in trading activity.
On top of that, Binance has positioned itself to pick up the pieces FTX left behind. It’s now acquiring Voyager Digital, which FTX had been in the process of buying. It’s also leading a crypto bailout fund that could give it investments in numerous other crypto services firms around the world.
Binance is already huge, but it’s likely to get even bigger in 2023.
5. Regulators Will Put a Spotlight on Exchanges
Ironically, FTX CEO Sam Bankman-Fried was one of the most active lobbyists in Washington, D.C. when it came to crypto regulation. He had helped write legislation that would regulate the crypto industry while giving it room to grow. Now lawmakers feel burned, and they could revisit the crypto industry with a vengeance.
At the same time, regulators tend to react strongly whenever customers lose money. FTX lost an estimated $1-$2 billion in customer funds, so it seems likely that regulators will do whatever they think is necessary to rein in exchanges.
It’s not yet clear what form new regulations could take. But the crypto world is bracing for an overreaction that could be another major hit to the industry in the middle of the crypto winter.
6. Ethereum Will Dominate for Another Year
Ethereum suffered from the FTX collapse along with the rest of the crypto world. ETH prices fell by 30% during the implosion and still haven’t recovered.
However, FTX’s failure could be a good omen for Ethereum in 2023 and beyond. FTX was one of the biggest backers of the Solana ecosystem, which is a direct competitor to Ethereum.
Solana had struggled with hacks and outages even before FTX imploded. The blockchain appears to be all but decimated since so many projects were funded by FTX. Solana’s SOL token has lost nearly 70% of its value and shows no signs of bouncing back.
7. Self-custody Will Grow in Popularity
At the heart of FTX’s implosion was the fact that it improperly shunted customer funds from the exchange to its sister hedge fund, Alameda Research. The collapse proved the adage, “not your wallet, not your funds.”
In the wake of that fraudulent activity, crypto investors are overwhelmingly turning to self-custody wallets. While these come with their own security challenges, they put investors in charge of their own tokens. Look for new wallets to emerge in 2023 to meet the increased demand for self-custody solutions.