By Hannah Lang and Elizabeth Howcroft
(Reuters) – The global cryptocurrency market remains badly scarred following the tumultuous collapse of cryptocurrency exchange FTX and other big players last year, with cryptocurrency prices, volumes and venture capital investment well below their peaks. peaks of 2021.
Sam Bankman-Fried, former CEO of FTX, will go on 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 of a series of industry crises that saw bitcoin plummet to its lowest price since 2020. While bitcoin and other major tokens have partially recovered, the sector remains far from the peak it reached in late 2021.
Here are five charts that show how the crypto landscape has changed.
BITCOIN BLUE
Bitcoin, by far the largest cryptocurrency and the main barometer of crypto market sentiment, has rallied approximately 37% since November 1.
The cryptocurrency peaked in 2021, reaching a record high of $69,000 in November of that year. But when central banks began raising rates in early 2022, riskier assets like cryptocurrencies began to feel the pinch as investors looked elsewhere for better returns.
Bitcoin lost more than 65% of its value last year, hit by the collapse of the terraUSD stablecoin, which led Singapore hedge fund Three Arrows Capital to file for bankruptcy and wreaked broader havoc on crypto markets.
Several other companies also collapsed, but the FTX crash pushed bitcoin below $16,000 in November last year. Bitcoin took another hit earlier this year when Silvergate Bank, a popular US partner for cryptocurrency companies, said it would close.
Still, bitcoin has regained almost three-quarters of its value this year thanks to interest from major financial firms, including BlackRock, and hopes that interest rate increases are ending. On Monday it was trading at around $28,089.
“The FTX debacle came at the end of an annus horriblis that had already seen a technology sector collapse, sharply higher interest rates and self-inflicted wounds in the industry,” said Ben Laidler, global markets strategist at eToro.
MARKET CHAPTER THAT FALLS DOWN
After reaching a high of $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 regained some ground, hovering around $1 trillion for most of this year.
“The issues with FTX have certainly affected confidence in the broader crypto ecosystem,” said Usman Ahmad, CEO of Zodia Markets, the crypto exchange of global bank Standard Chartered.
STABILIZING BITCOIN?
Known for its volatility, bitcoin has gained some stability this year.
However, the relative calm in cryptocurrency markets is not necessarily a good thing, some market participants said, noting that many investors are attracted to cryptocurrencies precisely because of their volatility, which offers opportunities for quick profits.
“We expect low to medium volatility in the short term,” said Anders Kvamme Jensen, founder of crypto company AKJ.
VC CRYPTO BETTING DROP
Venture capital (VC) investments flooded into cryptocurrencies during their boom year of 2021, and even into 2022. But such bets have slowed considerably this year, after many companies suffered from the market crash.
U.S. venture capital cryptocurrency investments totaled $6.12 billion in the first quarter of 2022, but fell to just $870 million in the same quarter this year, according to data firm PitchBook .
“This slowdown was not primarily due to the failure of FTX, but was already underway with the collapse of the [terraUSD] ecosystem at the beginning of the year,” said Robert Le, senior crypto analyst at Pitchbook.
"Venture investors are now acting cautiously," he added.
MISSING VOLUMES
Since FTX failed, cryptocurrency trading volumes have plummeted, causing traders who had been attracted by the market's strong liquidity to stop buying and selling tokens or leave the market entirely.
In September 2023, total monthly volumes in the spot and derivatives markets fell to $1.4 trillion, more than 60% lower than in September 2022, according to London-based researcher CCData. Spot markets were hardest hit, with volumes falling more than 70% to $272 billion.
Meanwhile, derivatives volumes have fallen 60% to $1.1 trillion in the 12 months since September 2022.
“The departure of some large market makers after FTX significantly reduced liquidity, which has led to low trading volumes and low volatility,” said Noelle Acheson, an economist who closely follows cryptocurrencies.
(Reporting by Hannah Lang in Washington and Elizabeth Howcroft in London; Additional reporting by Tom Wilson in London; Editing by Michelle Price and Andrea Ricci)
