With major cryptocurrency exchange FTX on the brink of collapse, some investors are beginning to question the viability of a sector already bruised by the bitcoin bubble bursting and closures of key market players.
“From a financial side, it’s fair to say that confidence is going to be somewhat shaken because if you can’t trust FTX then what can you trust?” Yat Siu, co-founder of Hong Kong-based investor Animoca Brands, told Reuters on Wednesday. “Now that the balance sheet strength of Alameda Research and FTX is under question only a few months after being perceived as strong balance sheet entities, it creates a confidence crisis and reduces the appetite of other crypto companies to come to the rescue.”
In the case of FTX, U.S. residents can’t trade on its global platform due to strict regulations for the crypto space in the United States. FTX has a U.S. partner,Ken Lo, co-founder at Hong Kong-based crypto exchange and custodian Hong Kong Digital Asset Exchange, said counterparty risk, which comes from a lack of transparency and information disclosure, underscores the need for “clear regulatory framework and vision statement.
“The people who are the best of all of us, end up being the ones to disappoint the industry. But it is a lesson which seems to keep repeating itself,” he added, citing certain star traders in various companies that ended up in trouble.
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