Crypto craze ISN’T a bubble, insist bosses as contagion fears mount

Crypto bosses were forced to deny yesterday that the tokens they trade are the “tulip bulbs of the 21st century” after the industry’s latest collapse.

Industry executives were questioned by MPs on the Treasury Select Committee amid growing calls for regulation following the chaotic collapse of the US stock exchange FTX.

They dismissed suggestions that their industry was similar to the speculative craze for Dutch tulip bulbs in the 17th century — a bubble that subsequently burst and resulted in one of the most famous crashes of all time — but admitted that crypto investors were at risk of losing 100 percent. of their resources.

Meanwhile, figures showed that billions of pounds worth of crypto assets have been withdrawn from exchanges over the past week amid the collapse of FTX.

The fallout from the debacle extended beyond the financial sector, with Toto Wolff, boss of Formula 1 team Mercedes – which was sponsored by the platform – expressing “utter disbelief” and calling for more regulation of the industry.

FTX filed for bankruptcy and 30-year-old founder Sam Bankman-Fried stepped down last week after financial health rumors led to £5.1bn of assets being pulled out and bigger rival Binance backing out of a proposed rescue deal.

The episode is being investigated by a number of authorities, including US prosecutors and the securities regulator in the Bahamas, where FTX is based.

The investigation comes as Binance founder Changpeng “CZ” Zhao claimed yesterday that his arch-rival Bankman-Fried misled customers and investors as FTX spiraled out of control.

Zhao said, “In this case, I think they lied. FTX lied. I think Sam lied to his employees, his users, his shareholders, regulators around the world.”

At the same time, Singapore-based cryptocurrency exchange Crypto.com was forced to deny it was in trouble, fearing the fallout from FTX’s bankruptcy could spread via “cascading.”

Harriett Baldwin, chairman of the Treasury Select Committee, asked crypto executives appearing in Westminster yesterday: “With the collapse of so many crypto assets in the news last week, would you say crypto assets are the tulip bulbs of the 21st century? ?’

Daniel Trinder, vice president for government affairs in Europe and crypto exchange Binance, said: “I wouldn’t say it’s tulip bulbs.”

He said the collapses this year were largely due to “failures around governance, around risk management, around excessive leverage, over – if the reports are to be believed – inappropriate use of clients’ assets.”

Tim Grant, head of Europe, Middle East and Africa for crypto-financial services company Galaxy, said there was “no doubt” that of the thousands of tokens in circulation, some – such as the early internet stock trading in the 1990s – ‘would not end’. be worth a lot’.

“But it would be wrong to throw the baby out with the bathwater and say that all crypto assets are purely speculative,” he added.

Ian Taylor, executive director of trading organization Crypto UK, said: “We always advise people looking to invest to do their homework and maybe be prepared to lose 100 percent of their investment.”

Figures from data provider CryptoQuant, a data provider, showed that a net worth of £3.2bn in bitcoin and £2.1bn in ether was withdrawn in the week ending Sunday as the FTX crisis reverberated through the industry.

Stablecoins, a type of cryptocurrency considered to be less risky, saw £1.7 billion in outflows, according to figures reported by Bloomberg.

The value of Bitcoin – which had surpassed $69,000 a year ago – fell below $16,000 yesterday.