Crypto has survived worse than the fall of FTX: Chainalysis

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Blockchain analy­sis firm Chainal­y­sis has com­pared the fall of Mt. Gox to FTX to deter­mine how FTX’s bank­rupt­cy will impact the ecosystem.

It con­clud­ed that FTX was a rel­a­tive­ly small­er part of the cryp­to indus­try than Mt. Gox was at the time and that the indus­try should bounce back stronger than ever.

In a Nov. 23 Twit­ter thread, Chainal­y­sis’ research lead Eric Jar­dine began his com­par­i­son by first look­ing at the mar­ket share of the two firms, find­ing that Mt. Gox aver­aged 46% of all exchange inflows in the year lead­ing up to its col­lapse in 2014, com­pared with FTX’s aver­age of 13%, which oper­at­ed from 2019 to 2022.

Jar­dine not­ed in 2014, when Mt. Gox col­lapsed, that cen­tral­ized exchanges (CEXs) were the only play­ers in the game. Mean­while, in late 2022, near­ly half of all exchange inflows were cap­tured by decen­tral­ized exchanges (DEXs) such as Uniswap and Curve.

Exchange inflows of CEX­es com­pared to DEX­es between 2013 to 2022. Source: Chainalysis

Jar­dine men­tioned, how­ev­er, that FTX was slow­ly gain­ing in mar­ket share while Mt. Gox was see­ing theirs steadi­ly decline, and that busi­ness tra­jec­to­ries are worth con­sid­er­ing, adding:

“Mt. Gox was becom­ing one exchange among many dur­ing a peri­od of growth for the cat­e­go­ry, tak­ing a small­er share of a big­ger pie. FTX on the oth­er hand was tak­ing a big­ger share of a shrink­ing pie, beat­ing out oth­er exchanges even as its raw tx vol­ume declined.”

Despite this, Jar­dine con­clud­ed that Mt. Gox was a “linch­pin of the CEX cat­e­go­ry at a time when CEXs dom­i­nat­ed,” mak­ing it a big­ger part of the cryp­to ecosys­tem at the time of its col­lapse than FTX was.

Jar­dine then goes on to exam­ine the recov­ery of the cryp­to indus­try after the fall of Mt. Gox and found that while on-chain trans­ac­tion vol­ume was stag­nant for a year or so, activ­i­ty soon picked back up.

Relat­ed: Sam Bankman-Fried says he is ‘deeply sor­ry’ for col­lapse in let­ter to FTX team

In Feb. 2014, Mt. Gox sus­pend­ed trad­ing, closed its web­site, and filed for bank­rupt­cy pro­tec­tion after los­ing 850,000 Bit­coin (BTC) in a hack. 

Cus­tomers who had hold­ings deposit­ed on the exchange have still not received their funds back, but the Mt. Gox Trustee announced on Oct. 6 that cred­i­tors have until Jan. 10, 2023, to select a repay­ment method for the 150,000 BTC report­ed­ly in their pos­ses­sion.

Month­ly ser­vice inflows for cryp­to before and after Mt. Gox col­lapsed. Source: Chainalysis

Jar­dine believes that although there are oth­er fac­tors, such as Sam Bankman-Fried’s large pub­lic pres­ence, the “com­par­i­son should give the indus­try opti­mism,” as when it’s boiled down to mar­ket fun­da­men­tals, “There’s no rea­son to think the indus­try can’t bounce back from this, stronger than ever.”

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