Changpeng Zhao, the CEO of Binance, believes that we could see cascading effects in the crypto industry in the coming months after what happened with FTT, one of the largest crypto exchanges in the market. According to FT, Changpeng Zhao has also compared the current crisis in digital currencies to the financial crash in 2008. After the most recent events, Bitcoin (BTC) fell below $16,000.
Changpeng Zhao Believes Cascading Effects Could Take Place
According to Financial Times, Changpeng Zhao, the founder of Binance, believes that there could be a cascading effect in the crypto industry after what happened with the FTX ecosystem. During a conference in Indonesia, he explained that it is also possible to compare the current crisis in the crypto market with the financial crisis of 2008.
On that matter, he mentioned:
“With FTX going down, we will see cascading effects. Especially for those close to the FTX ecosystem, they will be negatively affected.”
Changpeng Zhao is also one of the most influential persons in the cryptocurrency market due to his role as the CEO of the largest exchanges in the world. It might take some time before the market recovers, but we could see many other projects falling and creating a domino effect. As he says, there might be other companies closely linked to FTX that could be affected as well.
In recent days, FTT, the digital currency of the FTX platform melted down from $25 to $2, showing the lack of confidence that there was among investors in this digital currency. At the same time, Binance announced that they were also selling their FTT holdings, which started a massive sell-off of this digital asset.
In addition, Zhao considers that it might be difficult to find a lender that would help FTX solve the current issues that it is facing. Moreover, there will be other exchanges, projects and companies that could be in a similar situation. Crypto projects that have been in contact with FTX or that collaborated very closely with this platform could be the ones affected.
In the long term, CZ believes that the whole crypto market will recover and that there will be a better period for the industry. It is worth taking into consideration that digital currencies tend to operate with different cycles. That means that there are periods of bull trends in which digital assets surge and the whole market is excited about them, and there are other periods in which virtual currencies will move lower.
During bear markets, it is very common to see similar situations to the one that affected FTX a few days ago and that have a large negative impact on the crypto industry. In 2017, when digital assets reached an all-time high, the fall of hundreds of Initial Coin Offerings (ICOs) lasted many years and affected a large number of projects.
Hence, the market could recover in the long term. But this does not mean that there will be no more pain in the coming months. As Changpeng Zhao said, “the market will heal itself.”