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Bitcoin and Ethereum prices have held steady since the collapse of FTX – but will cryptocurrency investors hold up?
- The collapse of the US exchange FTX will have a significant impact on crypto
- Despite the news, Bitcoin and Ethereum have held up relatively this week
- Investors are holding onto their wealth for now, according to data from eToro
- We take a look at where the leading cryptocurrencies can go from here
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Leading cryptocurrencies have made a small comeback in recent days, despite the collapse of major exchange FTX.
News of FTX’s bankruptcy last week sent shock waves through the crypto industry and beyond.
But cryptocurrencies have already entered a bear market, meaning prices have been under pressure for some time.
Zinc or swim? Bitcoin and Ethereum have entered waters since the collapse of FTX last week, but the
Given the magnitude of FTX’s collapse and the potential impact on the rest of the crypto industry, Bitcoin has held up well.
The world’s largest and best-known cryptocurrency gained nearly 2 percent on Tuesday to nearly $17,000 after falling to below $16,000 following news of FTX’s bankruptcy.
It fell 2 percent on Wednesday to settle at about $16,500, when crypto exchange Gemini was revealed to have halted withdrawals.
While Bitcoin has lost less than some might have expected — about 4 percent in the past five days — its value has fallen from last year’s peak of $67,500 this time around.
Ethereum crashed to $960 in the wake of the FTX collapse, but is now trading at $1,017. Like Bitcoin, its value has plummeted since last November when it peaked above $3,000.
AJ Bell investment director Russ Mold said, “The implosion of FTX will be a particular test of faith for crypto enthusiasts and under the circumstances, one could argue that Bitcoin is holding up relatively well at just under $17,000 given the deluge of bad news.
“The question now is whether more shocks and scandals will follow.”
Crypto investors appear to be holding onto their investments for now, with eToro data showing a small increase in the total number of global users of the investment platform that owns Bitcoin and Ethereum over the past week.
In terms of the average crypto holding company, little has changed in that time.
“Confidence will always be affected under these circumstances, but from our customer base we can see there is no panic,” said Simon Peters, crypto consultant at eToro.
“Users continue to hold on to their crypto assets in anticipation of market momentum.”
Crypto investors may be tempted to think the worst is over, but the fallout could last for some time. In the bankruptcy filing this week, it was revealed that FTX could have up to a million creditors who will try to recover money.
“Events like this always have a negative impact on the crypto market as a whole and in the short term there is already an impact on the prices of major coins,” says Peters.
“In the longer term, I believe the development of sensible, balanced regulation that keeps major crypto players operating ashore will prevent events like last week.”
Broader economic factors could also play a major role if the Federal Reserve and other central banks continue to tighten monetary policy.
As interest rates rise and Quantitative Easing is (slowly) withdrawn, the cost of money and return on cash rise. This may entice investors to treat money with more respect and take less risk,” says Mould.
“There could be more bad news to come, especially if central banks stay on track and keep raising rates, to take away at least some of the cheap liquidity that contributed so much to the interest in crypto in the first place .’