The crypto market bears the scars of FTX's collapse

The cryptocurrency market is starting to bounce back a year after the collapse of crypto exchange FTX and other big players in 2022 crushed prices, tarnished the industry and prompted a regulatory crackdown.

A jury in New York on Thursday found Sam Bankman-Fried (SBF), the former CEO of FTX, guilty of defrauding FTX's customers prior to its abrupt collapse in November 2022. He had pleaded not guilty and said that while he mismanaged the company, he did not commit fraud.

FTX was one in a series of industry meltdowns that sent bitcoin crashing to its lowest price since 2020.

While the sector remains far from the investment fever pitch it hit in late 2021, bitcoin and other major tokens have enjoyed a rally in recent weeks as the expected end of central bank rate-hiking cycles draws cash back into high-risk assets.

The crypto industry has also become focused on the prospect of new spot bitcoin exchange-traded funds (ETFs), which would throw open the market to more investors. Though none have been approved, several firms have filed for such a product.

“I think crypto markets have moved on," said Ben Laidler, global markets strategist at eToro. "The SBF trial is (a) a bit of a sideshow, and (b) probably just a reminder of a year that most in crypto want to forget."

Here are three charts that show how the crypto landscape has changed since the collapse of FTX.

Bitcoin Revival

Bitcoin, by far the biggest cryptocurrency and the chief barometer for crypto market sentiment, has more than doubled in price this year, making 2023 its best year since 2020 in terms of percentage gains.

The cryptocurrency was riding high in 2021, hitting a record $69,000 in November that year. But as central banks began to hike rates in early 2022, riskier assets like cryptocurrencies began to feel the pain as investors sought better returns elsewhere.

Bitcoin lost more than 65% of its value last year, pummeled by the collapse of stablecoin terraUSD, which led Singapore hedge fund Three Arrows Capital to file for bankruptcy and caused wider havoc in the crypto market. It fell under $16,000 in November 2021.

Analysts say growing excitement that the US regulator will soon approve spot bitcoin ETFs, along with the expected end of rate hikes, has fueled bitcoin's revival.

Several major financial firms, including BlackRock, have filed applications with the US Securities and Exchange Commission to launch a bitcoin ETF which, if approved, could draw billions of dollars of institutional money into the cryptocurrency, some say.

While there's no guarantee that the applications will soon be approved, the possibility seems enough to keep traders bullish.

This week, meanwhile, both the US Federal Reserve and the Bank of England kept rates on hold, marking a possible plateau for rate hikes.

Market Cap Uptick

After peaking at $3 trillion in November 2021, the value of the overall crypto market plummeted through 2022, hitting a two-year low of $796 billion as FTX imploded. It has since clawed back some ground, hovering above $1 trillion most of this year.

As of Thursday, the value of the global crypto market stood higher, thanks to the October rise in the price of bitcoin, at $1.35 trillion.

Stabilizing Bitcoin?

Known for its volatility, bitcoin gained some stability in the wake of the collapse of FTX.

Relative calm in crypto markets is not necessarily a boon, market players said, noting that many investors are attracted to crypto because its volatility offers chances to make quick profits.

Since mid-October, however, bitcoin's price swings have expanded again.

"All summer long, trade volume was low, volatility even lower and markets seemed stuck in a rut," analysts at crypto data firm Kaiko wrote, noting that unfounded speculation that a spot bitcoin ETF may be approved had reversed the situation.

"While there is still no confirmation of a spot-based ETF, markets seem not to care," they said.

VC Funding Dries Up

Venture capital (VC) investors poured money into nascent crypto firms in 2021, but the flows began to slow in 2022 and 2023.

US VC crypto investments in the third quarter of 2022 were just $704 million, down from an eye-watering $6.12 billion in the first quarter of 2022, according to data firm PitchBook.

"This slowdown wasn't primarily due to the failure of FTX but was already underway with the collapse of the (terraUSD) ecosystem earlier in the year," Robert Le, senior crypto analyst at Pitchbook, told Reuters last month.

"Venture investors are now proceeding with caution," he added.