Crypto winter will separate men from boys

Author: Martin Orena. PHOTO/COURTESY

What you need to know:

  • Those involved in crypto dealings were left wondering about the stability and safety of the wider crypto ecosystem beyond FTX...

After the collapse of cryptocurrency exchange giant FTX early in November last year, the cryptocurrency market was shaken to its core.

At its peak in July 2021, FTX which was operating a crypto exchange and hedge fund, had more than one million users and was the third-largest crypto exchange by volume.

Understandably, then, those involved in crypto dealings were left wondering about the stability and safety of the wider crypto ecosystem beyond FTX. Many economic forecasters predicted doom and gloom in crypto markets.

However, there has been uptick in the industry this week with the global market cap – the total value of all cryptocurrencies – rising to more than $920 billion by the time of writing this on Thursday morning.

This is an in increase from $815 billion in mid-November 2022. In November 2021, the global market cap was at $2.9 trillion.

For now it is clear that other centralised cryptocurrency exchanges are well-positioned to pick up where FTX left off and they are many, including Binance, Coinbase, Bitfinex, Kraken, KuCoin among others.

According to crypto data firm CoinGecko, there are more than 12,000 cryptocurrencies and 630 exchanges across the world.

Centralised cryptocurrency exchanges, or CEXs as they are commonly known, act as intermediaries between buyers and sellers and make money through commissions and transaction fees. According toHarvard University Economics professor Kenneth Rogoff, the emergence of exchanges was a major factor that fuelled cryptocurrencies’ price growth.

Binance is the world’s leading crypto exchange by volume with about $60 billion in reserves and was this week granted its seventh regulatory approval in the European Union by Sweden, but for this article I will focus on Coinbase, a publicly traded US company that operates a crypto exchange.

Coinbase has already established itself as a powerful brand given to regulatory compliance with an easy- to-use App. According to its website, their trading platform has more than 108 million verified users across more than 100 countries with $101 billion in assets.

To ensure that its users are not short-changed, Coinbase's chief legal officer, Paul Grewal, says that improvements in the platform’s compliance programme are geared towards ensuring that its customers are safe and their money works for them.

Coinbase, a publicly audited company with cash reserves of more than $5 billion, ensures that the future of crypto currencies are secure the world over.

This is why, despite FTX’s bankruptcy, exchanges such as Coinbase and Binance are growing leaps and bounds to further validate crypto trading around the world, including Uganda where trading of assets such as cryptocurrencies and Forex is on the rise among the youth.

But with the global economic slowdown and effects of the Russia-Ukraine war last year, the crypto market wasn’t spared either.

Coinbase said this week it was laying off 950 people, about 20 percent of its staff. The job cuts come in the midst of a so-called “crypto winter” that has seen crypto prices plummet, currencies such as Terra Luna crash, collapse of crypto lending firms such as Celsius Network, and downfall of FTX, among other negative effects.

But the turmoil that the crypto winter has brought is going to clean the crypto industry. 

Mr Martin Orena, is the CEO of DM Exchange, a Fintech company. @martinorena