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The cryptocurrency market could be in for some rough tides soon, given that FTX, once the largest cryptocurrency exchange, filed for Chapter 11 bankruptcy. The co-founder of Cardano, Charles Hoskinson, has addressed the situation with the FTX exchange, saying that it would have implications for the industry.
In a recent video, Hoskinson warned that the situation with the FTX cryptocurrency exchange would likely have adverse effects across the digital asset sector. He added that the exchange’s liquidity issues would not directly impact the Cardano network but would “cause issues” for the entire crypto space.
The Cardano founder added that the failure of the FTX exchange would attract more regulatory scrutiny into the crypto industry. One of the issues he pointed to was that FTX was heavily invested in lobbying efforts in the US. Therefore, the bankruptcy of this exchange might change the political sentiments towards the crypto space in an unpredictable way.
“The issue here is that should we see more systemic failures, there could be a belief for more regulatory scrutiny or more draconian laws to be passed to enable that scrutiny,” Hoskinson added.
Moreover, the failure of the FTX exchange will also damage the sector’s reputation and result in many crypto firms moving their operations offshore. Therefore, the demise of FTX was not a “minor event.”
It has been an eventful week for the crypto space, given the liquidity crunch witnessed at the FTX exchange. After halting withdrawals, the FTX exchange has filed for Chapter 11 bankruptcy, and its CEO, Sam Bankman-Fried, has also resigned.
The bankruptcy of FTX marks one of the greatest meltdowns in crypto history. The announcements of FTX’s bankruptcy and Bankman Fried’s resignation have been confirmed by the exchange’s Twitter pages. The bankruptcy filing comes after Binance walked away from a potential acquisition deal.
Before the bankruptcy filing, FTX scrambled to raise around $9.4 billion from investors and rival firms to rescue the exchange’s operations. FTX US and Alameda Research are also part of the bankruptcy filing.
Sources had earlier said that the risky trading positions taken by Alameda were part of the reason behind the huge gap in FTX’s finances. Alameda reportedly owes FTX around $10 billion.
The demise of FTX has also raised questions about the future of other firms, such as Voyager Digital and BlockFi. BlockFi has already suspended withdrawals. The crypto lender had received a rescue package from FTX after the collapse of Terra LUNA in May. FTX had also won a bid to acquire Voyager Digital, which filed for bankruptcy.
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Ali is a professional journalist with experience in Web3 journalism and marketing. Ali holds a Master’s degree in Finance and enjoys writing about cryptocurrencies and fintech. Ali’s work has been published on a number of leading cryptocurrency publications including Capital.com, CryptoSlate, Securities.io, Invezz.com, Business2Community, BeinCrypto, and more.
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