The recent fall of FTX has been brutal, but it’s not the worst to ever happen.
Key Details
- The crypto fallout caused by the recent fall of FTX is not over yet, but many think it isn’t the worst fallout in history.
- Many people have voiced worry that the current crypto fallout could be similar to the dot-com bust of the late 1990s and early 2000s.
- Although there are similarities between the two, the current crypto crash doesn’t look to be as bad as the dot-com bust of the past.
- There are not nearly as many companies involved and not nearly the amount of wealth.
Why it’s news
FTX, one of the giants in the world of cryptocurrency, has recently plunged in value—and it happened fast.
The failure of the large crypto exchange came as a surprise and brought fear to the sector causing many holders to sell causing many digital coins to drop quickly.
The quick fall of the company and how it affected others around it has struck fear in those who remember the dot-com bust of the late 1990s and early 2000s.
The bust was a stock-market crash that happened when a massive growth of internet companies quickly popped up and gained popularity and then fell off even faster.
“The bankruptcies in the crypto space resemble the dot-com collapse in the sense that there was a rapid increase in value not justified by fundamental values hype and a very rapid up the escalator down the elevator decline,” said associate professor of finance, Elvira Sojli.
Other than the fast growth and quick fall that happened in both cases, that is really the extent of the similarities. The main thing that came from the crypto fallout is exposed weaknesses mainly the need for regulation.
Many crypto investors have been against regulation in the past, but are now calling for regulations to fight against fraud and to make it a serious part of the economy.
“We need safety and soundness and clarity to the rules, and we need that legislative framework in place. It’s nice to see that a majority of people across this country believe the same thing,” says Crypto Council for Innovation strategist Cory Gardner.
The call for regulation has been a topic for a while, but is really racking the market as the crypto exchange company FTX took a deep fall and took crypto with it.
The fall of FTX was caused by the company using investor’s money to fund risky bets and losing, which would be hard to do if cryptocurrencies had more regulation.