The FTX crisis has steered various reactions within and outside the crypto ecosystem. The crisis saw a once mighty crypto exchange reduce to nothing within days and spread its contagion across the industry. As a result, firms associated with the exchange have tasted a fair share of bitterness since the collapse.
Analysts believe the impact of the crisis might endure within the crypto industry for a long time. However, some optimistic people believe the crypto space will bounce back quickly. Others fear the possibility of cryptocurrencies going into extinction.
Among the optimists is the crypto analytics firm Chainalysis. Recently, Chainalysis released an analysis comparing the Mt.Gox crisis to the FTX collapse. According to the analytics firm, the current situation is not the first challenge crypto has faced due to an exchange’s downfall.
Crypto Faced Worse During Mt.Gox Collapse
Chainalysis asked the crypto space to see the bigger picture and that the industry will recover since it has survived similar blows.
Mt.Gox was the first Bitcoin exchange in the crypto industry, but it collapsed in February 2014 due to a hack. As a result, the Japan-based crypto exchange lost 750,000 Bitcoin, equivalent to 6% of the entire supply of BTC at that time.
Mt.Gox’s loss caused a cascade effect on the crypto space, yet it has survived. While comparing the two events, it is worthy of note that Mt.Gox had a larger market share than FTX. Mt.Gox commanded 46% of exchange inflow compared to FTX’s 13%.
Chainalysis claims Mt.Gox was a much bigger player in the industry than FTX, but its collapse did not destroy crypto. However, the difference between the two events is that Mt. Gox’s market share declined while FTX’s rose. This implies that FTX’s collapse had a more significant blow psychologically than Mt.Gox. The FTX collapse reduced the confidence of crypto investors very significantly.
Why Crypto Will Become Stronger After FTX Collapse
Moreso, Crypto exchanges were scarce in 2014 compared to today. The industry is much more diversified now, with decentralized exchanges occupying nearly half of the exchange flow in late 2022.
Eight years ago, on-chain transaction volume remained stagnant for up to one year. But transactions returned to normal soon after, doubling the figures before the Mt. Gox incident. Users have been moving their assets from crypto exchanges to self-custody wallets.
As per Chainalysis, this comparison might make the industry more optimistic. Mt.Gox occupied a more significant share of the crypto space in 2014 than FTX does now. Although the 2014 collapse seriously impacted the market, the recovery rate was relatively fast.
Crypto market gains momentum on the chart | Source: Crypto Total Market Cap on TradingView.com
Another factor was that many people looked up to Sam Bankman-Fried. The bottom line is that the crypto industry has survived worse, and there is no doubt it will rebound and come back stronger.
Featured image from Pixabay, chart from TradingView.com Read More