How will the FTX collapse affect the cryptocurrency industry?

Analyst

Moody’s Investors Service

This crisis will have long-lasting effects on the crypto industry. Falling crypto asset prices will restrict businesses’ ability to raise funds and depress customer demand. Lower crypto asset valuations will restrict businesses’ ability to issue tokens to finance their expansion, constraining the industry’s future earnings. Falling asset prices will also depress demand for crypto services. The Bank of International Settlements estimates that 73%-81% of crypto investors have likely lost money on their investment as of November 2022.

These factors will deteriorate the credit quality of CeFi companies and intermediaries managing their customers’ crypto transactions. DeFi applications, financial platforms allowing participants to interact without intermediaries will also feel the effects of FTX’s demise despite being more transparent. We anticipate that financing will continue to decline in the upcoming quarters.

Product Watch

The impact of FTX’s collapse is significant, and many people will be directly and indirectly affected by these failures, the full details of which will only be fully known in the weeks and months to come. Our sympathies lie with them.

What happened at FTX was not a failure of the crypto or blockchain ecosystem, but of a single organisation that acted irresponsibly and lacked transparency in its actions. Similar scenarios have happened across various industries - including in technology and financial services - and will likely happen again. The industry has an opportunity and responsibility to take stock of its values and advocate for a better, safer ecosystem that paves the way to new models of ownership. Together with regulators, we can capitalise on blockchain’s inherent transparency and help address issues that the traditional financial system cannot solve.

Standard Chartered unveils funds based on its CIO’s views

Standard Chartered Bank has unveiled the Signature CIO Funds based on views released by its chief investment office, led by its CIO Steve Brice

For a minimum investment amount of S$1,000, retail investors can have access to four global diversified multi-asset fund portfolios – Signature CIO Income Fund, Signature CIO Conservative Fund, Signature CIO Balanced Fund and Signature CIO Growth Fund. These cater to different investment objectives and risk profiles.

“Our Signature CIO Funds, backed by the CIO views, help investors avoid behavioural biases such as ‘analysis paralysis’ or excessive trading which may be detrimental to long-term investment returns,” Brice said, commenting on the launch of the funds.

For example, Signature CIO Income Fund is designed for investors to generate a regular income, allocating 53% of its portfolio to fixed income, 34% to equities, 1% to cash, 9% to hybrids, and 3% to REITs and infrastructure.

Standard Chartered developed the funds alongside asset manager Amundi. It leverages Amundi’s institutional relationships and direct pricing from market makers, allowing for optimal implementation, with the flexibility to choose between active and passive investments.

Retail investors can now subscribe to the funds through their relationship managers. Subscription on SC online website and SC Mobile Banking App will be available from 17 February onwards.

History is cyclical and has shown its tendency to repeat itself. Like the traditional banking industry, the cryptocurrency and blockchain industry is going through its rite of passage, with some inroads to make before it reaches the trust levels of banking.

Here at Independent Reserve, we believe that the recent setbacks, FTX’s insolvency, and the Terra Luna collapse are watershed moments that can positively shape the industry’s future. Events such as these, albeit painful, would mean that the market will eventually converge and consolidate in the longer run, weeding out the bad players as institutions and retail customers demand stronger regulatory oversight and for exchanges to be more professional in their business conduct.

To safeguard consumer interest, regulators need to steer exchanges to exercise greater agency over their operations and risk controls to ensure that the right level of risk in place.