The first year after FTX left Crypto

Original Title: Crypto's First Year After the FTX Blowup: 'It's Been Miserable'

Original Authors: Bloomberg Crypto Michael P. Regan & Anna Irrera

Translation: Odaily Planet Daily 0xAyA

As Sam Bankman-Fried's case enters the trial phase, many cryptocurrency players remain in survival mode.

Sara Feenan took a leap of faith in 2017, leaving her finance career to enter the brave new world of crypto.

Feenan has worked at a blockchain technology company and Binance exchange over the past few years, and she was excited to be part of a movement that promised to transform and improve almost everything. She even named her dog after the inventor of Bitcoin. Then, in the turmoil of 2022, the FTX exchange experienced a stunning bankruptcy in November. With the subsequent months of fallout, Feenan (whose most recent job was at a startup) found herself out of work, after which she left the cryptocurrency industry.

"I’m a bit disappointed," said Feenan, who now works at a non-crypto fintech startup in London. "Things like FTX are a bit frustrating. If you tell people you work in crypto and something like this just happened, it’s hard to say that the people here aren’t out to scam you."

While clouds of doubt and suspicion have loomed over this emerging asset class from the start, they may never have been as thick as in recent months since the collapse of FTX and its enigmatic leader, Sam Bankman-Fried. With SBF facing charges next week as one of the largest financial frauds in U.S. history, this cloud of doubt and suspicion is unlikely to dissipate anytime soon—despite his not guilty plea to a series of charges against him.

Of course, nothing affects market sentiment more than price. Although Bitcoin has rebounded about 60% this year, trading at around $27,000, it remains far below the record of $69,000 set in November 2021 and has been stuck in a trading range for most of the time. The market, once valued at nearly $3 trillion, is now down to about $1 trillion. The dream of Bitcoin or any other cryptocurrency token becoming a true alternative currency remains just that—a dream.

Trading has dried up, and once-hot market corners, like NFTs, now look like the digital tulips critics have long claimed they are. According to data from dappGambl researchers, 95% of over 73,000 NFT collections are essentially worthless. Researchers cited data from The Block, stating that the weekly trading value of NFTs in July was about $8 million, just 3% of the peak in August 2021. Remember the highly touted NFT project NBA Top Shot by Dapper Labs? It turned basketball highlights into tradable tokens, some of which sold for over $200,000 in 2021. Now, hundreds of such tokens sit idle for sale, priced at just $1.

Crucially, the once-loose purse strings of the venture capital world have tightened significantly. According to Pitchbook data, as of September 19 this year, the total amount of venture capital deals targeting cryptocurrency and blockchain projects was about $7.3 billion, equivalent to a quarter of the total for all of 2021 and 2022. Moreover, job opportunities in the industry are dwindling. According to data from Revelio Labs, based on 35 large companies, while the cryptocurrency industry's workforce grew by over 18% at the beginning of 2022, job opportunities have been declining throughout the year, with a recent decline rate exceeding 5%.

"Honestly, it’s really painful," said Nico Cordeiro, chief investment officer of crypto hedge fund Strix Leviathan. "Due to market conditions, revenues are negligible. You can’t attract new investors because no one is investing in this space. Participants in the industry are in survival mode: trying to keep operations going as long as possible until funds start flowing back into the space."

Strix Leviathan used to trade perpetual cryptocurrency futures on FTX's offshore exchange, which were unavailable on U.S. exchanges, but now funds are still locked in the bankrupt exchange through a major brokerage. Concerned about the lack of a safe trading venue, the company has halted perpetual futures trading, as FTX's main competitor, Binance, is also facing increasing regulatory scrutiny.

For those who have successfully launched cryptocurrency-related businesses in the post-FTX era, the road has been tough. Hilal Diab founded his company Market Mapper in January in Tel Aviv, Israel, a platform providing blockchain analytics for traders. But he quickly ran into trouble, unable to find a major online advertising platform willing to accept his business. He said that when he tried to register on Mailchimp to publish Market Mapper's newsletter, the company told him to find another service provider because it did not want to be associated with the cryptocurrency industry. Even his friends and family have been cautious about it.

"Once I tell people my startup is related to cryptocurrency, they get nervous. That’s the first reaction I get," he said. "Some investors are very hesitant to give us money, especially after the bad events with FTX. They fear being sued."

Following the bankruptcy of FTX and last year's cryptocurrency crash, lawsuits and various other cases have been on the rise. In addition to FTX's own bankruptcy and Bankman-Fried's impending criminal case, cryptocurrency companies Genesis Global, Celsius Network, Voyager Digital, Three Arrows Capital, and BlockFi Inc. have all been embroiled in bankruptcy and related legal disputes. Last Friday, Three Arrows co-founder Su Zhu was detained in Singapore and, along with co-founder Kyle Davies, faces potential imprisonment for refusing to cooperate with the liquidators' investigation into the bankrupt hedge fund.

Meanwhile, Coinbase Global Inc. is battling the U.S. Securities and Exchange Commission (SEC) over allegations of unregistered securities for many cryptocurrencies traded on its exchange, while also relentlessly lobbying Congress and making progress overseas.

At the same time, Binance is caught up in enforcement actions from the Commodity Futures Trading Commission (CFTC) and the SEC. Even Bankman-Fried's parents have been drawn into a lawsuit aimed at recovering funds they received from FTX.

However, surprisingly, according to Georgetown University finance professor Reena Aggarwal, the courts are also a rare source of optimism that could help find a bottom for cryptocurrency prices. She cited a recent appellate court ruling that overturned the SEC's decision to block Grayscale Investment LLC's proposed spot Bitcoin exchange-traded fund, as well as another judge's ruling that Ripple Labs' XRP token is not considered a security when sold to the general public.

"The SEC has been trying to enforce and say that cryptocurrency is the Wild West and we need regulation, but the courts have pushed back," she said. "In a sense, this has given the industry a new lease on life."

In fact, with BlackRock Inc., Fidelity, Franklin Templeton, and others hoping to eventually get their spot Bitcoin ETFs approved, and traditional Wall Street firms busy with blockchain projects aimed at turning traditional assets into digital tokens, the future of crypto innovation has arguably never been closer to compliance.

As for Feenan, the cryptocurrency exile in London, her dog Toshi is named after Bitcoin's mysterious inventor Satoshi Nakamoto, and she herself is not ready to give up on the digital asset industry forever.

She said, "Cryptocurrency can go from obscure to very silly in a short period of time."

"If interesting projects come up, and if I think this project will help drive progress, I would come back."