In the world of crypto, the mainstream’s focus is still on the fallout of FTX.
The arrest of Sam Bankman-Fried, in The Bahamas of all places, delivered the latest dramatic twist in this saga. And while I’m sure it will make for a great documentary at some point, any real crypto enthusiast has likely moved on.
Don’t get me wrong, the collapse of this exchange has been devasting for everyday people. Too many people lost too much from these fraudulent activities.
But as I said, smart investors aren’t going to dwell on this.
Some will abandon crypto, some will hold on through the downturn, and some will buy in even more…
Like I said last week, the market for crypto is in a period of ‘extreme fear’ right now. And while that is certainly deserved, given the broader media coverage, it doesn’t mean investors should shy away.
It is during these tough times that the best buying opportunities present themselves.
After all, we’re already seeing winners emerge from FTX’s downfall.
The next exchange to be tested
One of these winners, in my view, is Binance.
As the world’s biggest crypto exchange, Binance is basically what FTX wished it was. It has plenty of people actively trading crypto coins and tokens constantly.
But that doesn’t mean it hasn’t faced challenges recently.
As one blockchain data firm confirmed earlier this week, Binance saw US$1.9 billion withdrawn from its exchange in 24 hours. That is a huge outflow of liquidity, but CEO Changpeng Zhao was quick to dismiss any big fears:
‘Yesterday was not the highest withdrawals we processed, not even top 5.’
This is why Binance saw US$718 million in inflows following the sell-off…
A sign that investors are clearly aware of the dip buying opportunity. Not to mention the assurance that ‘user assets at Binance are all backed 1:1‘.
As a lot of the doom and gloom passes, I expect this is why Binance will walk away a big winner. It’s only continuing to build its strength as the dominant exchange.
The only real question mark over its immediate future is what the regulators will do…
The hand that feeds
The big loser in this FTX fiasco is the fact that crypto regulation is likely all but guaranteed.
What really matters, though, is how crypto will be regulated. Having the SEC weigh in and deliver drastic oversight isn’t going to work.
As billionaire Bill Ackman notes:
‘Regulators need more resources to police the bad actors. Unfortunately, it will likely take years for the regulators to catch up, and they may never get there.
‘The crypto industry therefore needs to self-police and out the bad actors, or it is at risk of being shut down.’
I couldn’t agree more with this take.
Crypto’s entire premise is built upon its ability to be decentralised. So, while some external oversight may be impossible to avoid, it can’t overtake the core appeal of this asset.
Self-regulation is clearly a great way to address that, but talk is cheap. How and who decides in a self-regulating crypto market is the real stumbling block.
I don’t think it is impossible, though, and a lot of the people in crypto are smarter than I.
That’s precisely why I think investors should be looking closely at crypto. Because while prices are certainly down, the innovation is still as strong as ever.
All you need to ask yourself is if you’re game to buy the dip.
If you’re looking for a good place to start, check out Ryan Dinse’s Crypto Capital.
Regards,
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Ryan Clarkson-Ledward,
Editor, Money Morning
Ryan is also co-editor of Exponential Stock Investor, a stock tipping newsletter that hunts down promising small-cap stocks. For information on how to subscribe and see what Ryan’s telling subscribers right now, click here.
