The Dot-Com Bubble and the Infamous FTX Crash3-min read

Bitcoin (BTC) has drastically dropped to approximately $16,500 following the bankruptcy of FTX, one of the most prominent cryptocurrency exchanges in the world. This is a substantial decline compared to its record high of $66,000 in the past year.

FTX and Macro-crypto-nomics: Why Such a Massive Decline?

The precipitous decline in value can be attributed to the hazardous combination of the Binance exchange, the Tether stablecoin, and influential professional traders running sophisticated algorithms. Binance, with its dominant market share of over 50%, sets the price of Bitcoin and other cryptos, while traders must exchange their fiat currency for Tether to purchase cryptocurrencies. The Bitcoin-Tether pair has the most significant trading volume on Binance, so changes in its price dictate the dollar value of Bitcoin. In summary, the success of Bitcoin is intertwined with the health of the broader crypto ecosystem.

The recent turbulence in the cryptocurrency sector can be analogised to the fallout of the dot-com bubble in 2001-2 when a sudden cessation of venture capital investment into internet startups occurred as a result of a number of businesses becoming insolvent.

This year, with the bankruptcy of Three Arrows Capital (one of the largest crypto hedge funds), and major crypto-lending companies Celsius and Voyager filing for insolvency, the market has been rocked by a series of unexpected shocks. Exchanges such as FTX, Gemini and Genesis have all prevented customers from withdrawing their funds, while Blockchains, NFT marketplaces, data aggregators and analytics companies have all been hit hard. The lack of venture capital has seen a contagion of bankruptcies spread across the sector, and with no sign of the situation improving, many more are expected to follow. With the current climate of uncertainty, it is clear that the crypto industry is facing a tough time, and it remains to be seen if it can recover from the shock.

Amidst these uncertainties, Binance stands as one of the key players in the space. Although the company is non-domiciled and self-regulated, it is still reliant on fees from ordinary investors and the services of market makers to facilitate its operations. Should Binance be able to successfully navigate this tumultuous period, it could potentially emerge as one of the dominant forces in the industry with a near-monopolistic hold on the market.

Bringing a Market Back From The Brink: The Steps Forward

As crypto markets become increasingly volatile, investors are warned to proceed with caution, lest they be tempted to re-enter the game only to see their savings wiped out. With the potential for drastic profit and loss, only those with professional experience and expert knowledge have a fighting chance in such a fickle market. Optimistic investors are exploring the use of crypto trading bots to ensure their investments remain safe, as well as to recover any losses incurred during trading. These bots can help ensure a safe, measured investment strategy, and aid in long-term investing success in the crypto space.