This year may be pivotal for the future of cryptocurrency

After a catastrophic finish to 2022, this yr might be essential for crypto. Corporations and traders are selecting up after FTX’s collapse, as they brace themselves for extra scrutiny and rules.

MARY LOUISE KELLY, HOST:

Cryptocurrencies have been touted as the way forward for finance. Now they’re in disaster. Bitcoin is floundering after a pointy sell-off. And, after all, there’s the fallout from the catastrophic collapse of the cryptocurrency alternate FTX, which now could be spreading.

NPR’s David Gura joins me. And, David, I need to begin with FTX. Everyone’s speaking about it. What does it really inform us concerning the wider state of crypto?

DAVID GURA, BYLINE: Effectively, for one factor, it tells us how a lot has modified. I imply, simply return to the start of final yr, when crypto was being marketed as the following massive factor with these marquee endorsements and Tremendous Bowl adverts. Effectively, now FTX has imploded, and that is elevating questions on this complete trade as a result of this firm that had identify recognition and a world footprint is now on the middle of what is allegedly one of many largest frauds in historical past. So FTX’s collapse is shaping the general public’s sense of what crypto is, Mary Louise. And that is not going to vary as we be taught extra concerning the firm’s downfall as its former CEO fights legal expenses and as FTX, below new management, goes via chapter proceedings.

KELLY: Yeah, stick with the place every part stands in courtroom for a second. What is the newest?

GURA: Yeah. So Sam Bankman-Fried just lately pleaded not responsible to eight legal expenses. And if he is convicted, a trial which is scheduled to begin in October, Bankman-Fried might spend the remainder of his life in jail. Federal prosecutors are constructing their case on a whole bunch of hundreds of paperwork they are saying will make clear how Bankman-Fried’s crypto empire operated.

Then in Delaware, in chapter courtroom, greater than one million collectors, together with many FTX prospects, are attempting to recuperate cash that is gone lacking. Bear in mind; what’s alleged is that Bankman-Fried misused buyer cash. And one factor he is accused of is utilizing it to cowl losses when cryptocurrency costs cratered. In order prosecutors and investigators uncover extra, we’ll get new particulars on how interconnected the world of crypto is and in addition how a lot this sector has evaded scrutiny.

KELLY: I mentioned once I launched you that the fallout from the collapse of FTX is spreading. How so?

GURA: Yeah. There’s going to be extra scrutiny. We’ll see extra about that. Regulation enforcement will come down tougher on cryptocurrency firms going ahead. Bear in mind many first-time traders misplaced cash shopping for Bitcoin and different digital currencies after they peaked. There’s worry different crypto firms might crash and burn.

Alkesh Shah is a strategist at Financial institution of America, and he says the trade simply cannot proceed as is. For one factor, there are too many tokens, too many various sorts of cryptocurrencies.

ALKESH SHAH: So should you take a step again, there’s about 22,000 tokens traded on about 170 exchanges globally. And most of these tokens have just about no intrinsic worth.

GURA: Shah expects perhaps 50 of them might be viable after this reset. So simply take into consideration that, Mary Louise. He predicts we’ll go from 22,000 totally different sorts of cryptocurrency to only 50.

KELLY: Yeah, that is fairly the change by way of the variety of cryptocurrencies we could also be trying about – . What about their worth? What’s Wall Road anticipating?

GURA: Effectively, the so-called crypto winter reveals no indicators of thawing. It is a downturn that kicked off when the Federal Reserve began climbing rates of interest to struggle excessive inflation and traders misplaced their urge for food for threat. Bitcoin fell by about 60% final yr. Madeleine Hume is an analyst for Morningstar, and she or he says we could also be within the bleakest days of that crypto winter. And pessimism is pervasive.

MADELINE HUME: It has been chilly for thus lengthy. There aren’t any extra holidays or ski holidays to look ahead to, and there isn’t any finish in sight.

GURA: Bitcoin is up barely 9 days into the brand new yr, buying and selling at round $17,000, Mary Louise. However that’s nonetheless a far cry from its all-time excessive of about $69,000. And that is not historic historical past. Bitcoin set that report simply over a yr in the past.

KELLY: Thanks, David.

GURA: Thanks.

KELLY: NPR’s David Gura.

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