The $3 trillion cryptocurrency market is still rattled by the aftershocks of the FTX collapse. The prices of digital currencies continue to drop as investor sentiment has been adversely affected by adverse market conditions. What does this mean for the cryptocurrency industry? Let’s look into that!

FTX And What Is Currently Happening in the Crypto Industry

The price of Bitcoin, the world's most valuable cryptocurrency, has plunged by 65% over the year, while Ether, the second-most valuable cryptocurrency in the world, has fallen by 20% over the last week alone. More than half of the market for digital currencies is made up of Bitcoin and Ethereum (Ether).

The bankruptcy of cryptocurrency giant FTX and the decline of Bitcoin and Ether’s value have raised questions about the future of blockchain technology and cryptocurrencies. The FTX scandal only compounds the downward trend in cryptocurrency prices that has been ongoing all year. The industry's value has dropped from $3 trillion to $900 billion.

What Was the Issue With FTX?

Over 5 million people used FTX in the world last year alone, and more than $700 billion worth of trades were made. The collapse of FTX was the result of a series of mistakes. After a spike in customer withdrawals earlier in the month, FTX declared bankruptcy on November 11, 2022. The company did not have enough assets in the reserve to meet customer demand, according to the then-CEO Bankman-Fried.

Also, bad governance contributed to FTX’s failure. FTX had been covertly funneling money to Alameda Research, which is co-founded by FTX's CEO. The exchange is now under investigation by the Securities and Exchange Commission and Justice Department.

What Is Next for The Cryptocurrency Industry?

The proof of funds is actively being verified by many cryptocurrency exchanges at the moment. These, however, are only a moment in time. How will it benefit investors should these reserves be shown in real-time, over a period?

The value of other cryptocurrencies is dropping for a variety of reasons, including the growing uncertainty surrounding the status of liabilities and their interconnections with FTX.  Regulations are most likely to be one of the long-term effects. Investors anticipate tough government regulatory standards to safeguard what has been happening in the crypto industry.

It is anticipated that top players in the crypto industry will reassess the risks and expectations they have. Nevertheless, retail confidence has been significantly hit by the FTX scandal. Investors and crypto enthusiasts have been compelled to reconsider the risks associated with investing in the cryptocurrency market in light of the FTX incident. The market will inevitably experience a decline in confidence.

The infectiousness among cryptocurrency participants and investors may cause the cryptocurrency market to become static for some time. FTX could be the first of a few companies that could be severely harmed for various reasons. The coming months may be chaotic and can be managed because FTX was only a trading exchange.

Nevertheless, since the introduction of derivatives about a decade ago, decentralization of the financial market has most likely been the best financial innovation. There is great potential in cryptocurrency and blockchain, but sustainable regulations are required for it to materialize properly.