December 6, 2022

Fear Hits Cryptocurrency – FTX Hack Compounds The Crypto issue

It goes without saying that last week’s collapse of the FTX exchange represents one of the crypto industry’s worst-ever episodes. It was one episode that clearly reflected in digital-asset markets. 

FTX Effects On Cryptocurrency Giants

Consequently, The price of bellwether bitcoin (BTC) tumbled 22% in the seven days through Sunday. This also turns out to be its worst weekly performance since mid-June. In June when traders were grappling with the aftermath of the Terra blockchain’s collapse. 

Things got incrementally worse over the weekend. The reason was clear. FTX and its U.S. subsidiary, FTX US, became victims of an attack. One that drained hundreds of millions of dollars in crypto out of the exchanges’ wallets. 

The crypto exchanges Binance and Huobi scrambled to block deposits of FTT, FTX’s native tokens. They did this after about $400 million of the tokens were unexpectedly released out of schedule, with no official explanation. 

The stablecoin issuer Tether blocked addresses tied to the FTX account drainer’s wallets.

What Will Happen To Other Crypto Institutions?

Crypto analysts are assessing what comes next for ailing digital-asset markets and policy ramifications for the reputation-wounded blockchain industry. 

Researchers at Coinbase Institutional say bitcoin, might be looking at a further price drop, possibly as low as $13,500.

However, one industry reform seems to be gaining momentum. Centralized crypto exchanges are being pushed to provide proof of reserves. 

It may take a lot more than that, and perhaps months, before the industry starts to regain public confidence. The widely-monitored Crypto Fear & Greed Index is signaling “extreme fear.

Furthermore, even though BTC has settled around $16,000 for now, the extent of the damage to other companies, funds, exchanges is as yet unknown. And all of it may come to the fore in the weeks to come.” This was what Joe DiPasquale, CEO of the crypto hedge fund BitBull Capital had to say. 

We remain cautious until the current situation is satisfactorily present and sentiment appears to start moving toward relative normalcy.” The SEC is keeping emails and notes that led to one of the most important speeches in crypto’s history secret from CoinDesk.

Meanwhile, in 2018, William Hinman, the then-Director of Corporation Finance at the SEC Commission, gave a speech. He gave the speech at the Yahoo Markets Summit that proved to be a watershed moment for crypto. Ether is not a security.

SEC And Ethereum On Regulations – Aftermath Of The FTX Collapse

Ether, Hinman said at the time, had become “sufficiently decentralized” and moved past its status of security-not-a-security to commodity.

Based on my understanding of the present state of ether, the Ethereum network, and its decentralized structure, current offers and sales of ether are not securities transactions,” a copy of the speech reads. 

Purchasers would no longer reasonably expect a person or group to carry out essential managerial or entrepreneurial efforts.”

Ripple has taken great interest in this as they were sued in December 2020 by the SEC. The legal suit was on the basis that they were offering unregistered securities via an initial coin offering. 

Ripple filed suit against the SEC requesting drafts of the speech along with internal notes. They went on to receive a favorable ruling in January 2022.

Furthermore, in late September, Ripple received a huge win in its case when a U.S. judge told the SEC to release emails and other correspondence. 

“I can say that it was well worth the fight to get them,” Ripple’s General Counsel Stu Alderoty tweeted.

Augustine Ojeh

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