Crypto craze isn’t a bubble, insist bosses
As market contagion fears mount . . .
CRYPTO bosses were yesterday forced to deny that the tokens they trade in are the ‘tulip bulbs of the 21st century’ after the sector’s latest collapse.
Executives from the industry were grilled by MPs on the Treasury select committee amid growing calls for regulation following the chaotic demise of US exchange FTX.
They rejected the suggestion that their sector was like the speculative craze for Dutch tulip bulbs in the 17th century – a bubble which subsequently burst resulting in one of the most famous crashes of all time – but admitted that crypto investors risked losing 100pc of their assets.
Meanwhile, figures showed billions of pounds worth of crypto assets have been withdrawn from exchanges over the past week amid FTX’s collapse.
The fall- out from the debacle has reached beyond the financial sector, with Toto Wolff ( pictured), boss of Formula One team Mercedes – which was sponsored by the platform – expressing his ‘utter disbelief’ and calling for more regulation of the industry.
FTX filed for bankruptcy and its 30year-old founder Sam Bankman-Fried quit last week after rumours about its financial health resulted in £5.1bn worth of assets being withdrawn, and larger rival Binance pulled out of a proposed rescue deal.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 Changpeng ‘CZ’ Zhao, founder of Binance, yesterday claimed his arch-rival Bankman-Fried misled clients and investors as FTX spiralled out of control.
Zhao said: ‘In this case I think they were lying. FTX lied. I think Sam lied to his employees, his users, his shareholders, regulators all around the world.’
At the same time Singapore based cryptocurrency exchange Crypto. com was forced to deny that it was in trouble amid fears the fallout from
FTX’s bankruptcy could spread through ‘cascading contagion’. Harriett Baldwin, chairman of the Treasury select committee, asked crypto executives appearing at Westminster yesterday: ‘ With the collapse in so many crypto assets in the news last week, would you say that 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 they are tulip bulbs.’ He said collapses this year were largely down to ‘failures around governance, around risk management, around excessive leverage, about – if we believe the reports – inappropriate use of clients’ assets’.
Tim Grant, head of Europe, Middle East and Africa for crypto financial services company Galaxy, said there was ‘no question’ that among the thousands of tokens in issue, some – like early internet stocks trading in the 1990s – would end up ‘not being worth much’.
‘ But it would be wrong to throw the baby out with the bath water and say that all crypto assets are purely speculative,’ he added. Ian Taylor, executive director of trade body Crypto UK, said: ‘We always advise people that want to invest to do their homework and perhaps be prepared to lose 100pc of your investment.’
Figures from data provider CryptoQuant, a data provider, showed a net £3.2bn worth of bitcoin and £2.1bn of ether were pulled out in the week ending on Sunday as the FTX crisis reverberated through the sector. Stablecoins, a type of cryptocurrency seen as less risky, saw £1.7bn worth of outflows according to the figures, reported by Bloomberg. Bitcoin’s value – which had topped $ 69,000 a year ago – dipped below $16,000 yesterday.