Is the FTX fiasco good for Bitcoin?

The bankruptcy of FTX sent the crypto market into the red. However, in the long term the latter could be positive for Bitcoin. We explain why!

Bitcoin: an example of resilience

Because after every BTC dump, share mourn the death of the asset. FTX’s bankruptcy has sparked critics of cryptocurrencies and Bitcoin. Many people use this example to promote stricter control and regulation. For others, this episode is a sign of the unregulated and harmful nature of this market.

Among them, we find the best-selling Indian author, Chetan Bhagat, who writes a vitriolic column related to crypts. In fact, he published a crypto commentary in which he compares the cryptocurrency industry to communism. For him, this sector promised decentralization and an end to authoritarianism.

The latter chooses an image of Bitcoin melting to illustrate his point. It is very quick to forget that whether an encrypted asset is resilient, it is Bitcoin. Since its birth, Bitcoin has been declared dead for the 466th time.

Hello everyone,
“Crypto is now dead: FTX, a cryptocurrency exchange, collapsed last week, proving many people very wrong,” my column in TOI today.

Keep reading and sharing! pic.twitter.com/A4ClVdHOt2

— Chetan Bhagat (@chetan_bhagat) November 15, 2022

The fall of FTX is similar to many of Bitcoin’s hardships Mt. Gox in 2014 for example. This bankruptcy also emphasizes this resilience and the the truly decentralized nature of the asset. Unlike a centralized entity like an exchange, Bitcoin cannot die due to lies and bad decisions.

In addition, it is certain that a develop decentralized exchanges and protocolss the need to reduce confidence in CEXs. After all, this is one of the reasons why the blockchain exists.

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FTX had no BTC in reserve

After the fall of FTX, many traders and investors logically remove your BTC from the exchanges. The total amount of BTC held by exchanges fell to 2.07 million on November 17th from 2.29 million at the beginning of the month.

We observe the largest outflows of funds in the United States. In fact, users are more and more withdrawn $1.5 billion worth of BTC last week.

Investors withdraw their BTC from exchanges (source: CryptoQuant)

Looking at FTX reserves, it can be noted that the exchange had no BTC in reserve. Market analyst Jan Wustenfeld says:

On the one hand this is bad because you will only find out that you will lose your funds once the stock market goes down.

The exchange’s very low exposure to Bitcoin thus reduces the likelihood that FTX will sell remaining funds to increase liquidity.

This event in particular is likely to push many investors to keep their funds from the exchanges. So these new hodlers will reduce the amount of BTC available for sale on the market.

We have also noticed in the last few days many investors who are learning about the use of a Ledger type of cold wallet.

Fall of altcoins benefiting Bitcoin?

The SBF was one of Joe Biden’s biggest campaign donors. He has been an important voice in the political arena, especially regarding the regulation of cryptocurrencies in the United States.

Recently, there has been a lot of speculation that Sam Bankman-Fried attempt to destroy the image of bitcoin by US legislators and various press articles. The latter would like to remember that Bitcoin would never be an effective means of payment.

MSM lionized this shady character. For example, here are 2 of the 219 articles about him @FT. @SBF_FTX‘s anti-Bitcoin, pro-centralization and pro-hand regulation values ​​are definitely aligned with their own.

Was he the poster boy for an orchestrated propaganda campaign? https://t.co/urJcu6mqB6 pic.twitter.com/PTIn1JudXG

— Bitcoms (@bitcoms) November 15, 2022

Bitcoin advocates, such as the President of El Salvador, Nayib Bukele, have also been vocal. It declares:

FTX is the opposite of Bitcoin. Bitcoin was created to prevent Ponzi schemes, bank runs, Enron, WorldCom, Bernie Madoff, Sam Bankman-Fied…bailouts etc. Some understand it, some don’t.
We are still ahead.

Indeed, when tokens like the FTT are created and operated by centralized entities, they are done vulnerable to manipulation. These actors control the issuance of tokens, the allocation before listing etc. So many risks weighing signs and their price.

For BOOX Research:

The crypto bubble that burst this year was at the level of tokens created for speculative purposes only. While it is debatable which cryptocurrencies are the right ones, FTT and LUNA are two examples that everyone agrees should not exist.

Also, this market or some altcoins are dying because of their intrinsic weaknesses beneficial for bitcoin. This hypothesis will appeal to Bitcoin maximizers who believe that BTC is the only reliable asset…

To learn more about Coinhouse’s crypto passbook suspension, find our article here.