By Adam Colley and Shaun O'Reilly
Despite the hype, the recent collapse of crypto exchange company FTX doesn’t signal the end of cryptocurrency – far from it. But nor was it just “a run on the bank”.
The drop in the crypto market in 2022 has been exacerbated by the far-reaching contagion of FTX’s insolvency. In this blog we look at the potential liquidity impact in Australia, as well as the levers and options available for businesses and investors.
2022 sent the cryptocurrency market on a rollercoaster ride, with total market capitalisation dropping from around US$3 Trillion in 2021 to just under US$1 Trillion. Exchanges are facing materially lower trading volumes.
As interest rates ratchet higher, availability of capital is tightening. Those unable to sustainably manage costs may discover they can’t rely on new capital, and their cash reserves don’t cut it.
Meanwhile, the ‘FTX effect’ will put growing pressure on exchanges to prove their resilience. Exchanges are looking at lower revenues, higher liquidity requirements, and more regulation.
Crypto is no stranger to volatility. But given the size and contagion of FTX’s collapse, we expect clear winners and losers. Trends include:
While we wait to see the extent of contagion caused by FTX’s liquidity crisis, we’ve developed five no-regrets actions businesses can take:
In short, in the wake of FTX’s failure – amidst the consternation, the accusations, and the recriminations – now’s the time for calm heads and clear thinking.
Our motto is ‘Be positive, but don’t have a positive bias towards what’s going on around you’. You need to assess and plan for the various scenarios which could impact your business in these uncertain times. Just because you’re planning for something difficult doesn’t mean you’re negative; it means you’re prepared.
People are at the centre of everything we do. We have a unique empathy for our clients and the stakeholders we deal with, whether we are helping executives and business owners, navigate their most complex issues, or protecting the interests of those impacted in a distressed business.