4 crypto experts detail the next move for the industry with volume down 50% since the FTX crash

• Cryptocurrency daily trading volumes fell by 50% after the collapse of FTX, according to data from Bloomberg and Caico.
• The fallout from Sam Bankman-Fried’s once $32 billion FTX empire is weighing on investor sentiment.
• Insider spoke with four crypto experts about what’s next for the emerging industry.

Cryptocurrency trading volumes fell by 50% after the sudden collapse of FTX, the once-$32 billion digital asset empire started by Sam Bankman-Fried.

Average daily trading volumes on centralized exchanges fell from $26.7 billion in the week through Oct. 30 to $13.1 billion in the seven days to Dec. 11, Bloomberg reported Friday, citing data provider Caico. These include platforms such as Coinbase, Binance, Kraken, OKX, and Bitfinex, to name a few.

The decline in trading volumes comes at a pivotal time for the industry, which has been experiencing a long and brutal bear market. The cryptocurrency market cap has dropped nearly three-quarters of its value since last year, according to Mesari, with bitcoin and ethereum down 75% from their record highs in November of 2021.

User trust in the exchanges is in question after the fall of FTX as well.

“The collapse of FTX brings us back to reality,” Shaaban Sham, founder and CEO of blockchain game developer EverDreamSoft, told Insider. “Cryptocurrency is a young industry. It is [the Wild] The West where anything is possible but is full of people with bad intentions and lack of rules.”

FTX has lost $8 billion in customer deposits after a Coindesk report revealed that the exchange’s native token, FTT, was used to support Alameda Research, a cryptocurrency trading subsidiary of Bankman Fried. The trading giant’s balance sheet, which previously held $14.6 billion in assets, consisted largely of the currency that made up the sister company — rather than a stand-alone asset like fiat currency.

This is ringing alarm bells. Swarms of investors fled the exchange and liquidated their FTT holdings in one go, landing FTX and 130 other related entities in bankruptcy court last month.

Sham says investors may continue to flee other centralized exchanges, putting their assets into noncustodial wallets, or ones that allow users to control their money independently of the exchanges.

Regardless, he added, the industry will take one of two different paths.

“Either they are highly regulated like the traditional finance industry or they are more decentralized. Exchanges are like old world banks, people trust them with their money and no one audits them,” Sham said. “There is a solution that is not as reliable as decentralized exchanges but it is not mature enough to support all use cases.”

“The decline in trading shows that people are becoming familiar with the mantra of ‘not your key, not your currency’ and are moving to uncustodial exchanges,” Sham added.

FTX infection could also weed out bad players in the industry in the future, another blockchain gaming executive predicts, setting the sector up for success for the next market cycle.

“Many bull market retail investors have left the market causing trading volumes to drop dramatically,” said Andreas Christensen, founder of blockchain game developer SuperOne. “FUD will remain for investors until the next up cycle, which will then be a massive uptake of high quality, transparent and compliant players.”

Christensen added, “In such a fragile bear market, a major criminal act like SBF with FTX would have a severe impact on market sentiment and trading volumes.”

Given the recent turmoil, it’s not surprising that investors are “risk off,” says Phil Wirtjes, head of strategy at digital asset trading platform Enclave Markets, as they assess the extent of the contagion.

“Credit lines are drying up and lack of confidence in central places is causing liquidity to drop, but we wouldn’t be surprised to see volumes rebound once certainty returns to the markets,” Wertjes added.

Finally, institutional and retail investor sentiment will continue to take a hit from the FTX fiasco, calling the industry’s credibility into question, according to a senior economist at BTCM.

“Institutions such as Fidelity and BlackRock are still slowly but surely pushing digital asset initiatives, while the majority of traditional institutions are in a ‘wait-and-see’ mode,” said Yue Yang, chief economist at a publicly traded cryptocurrency miner.

He added, “However, most cryptocurrency veterans are used to this kind of market downturn and lull from past circles and [are] It’s still hanging there.”