Cryptos post-FTX crisis laid bare as trading volumes drop 50%

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(Bloomberg) – Trading volumes on digital asset exchanges have halved amid waning confidence in the crypto sector following the collapse of the Sam Bankman-Frieds FTX platform.

Average daily trading volume fell to $13.1 billion in the week to Dec. 11 from $26.7 billion in the seven days to Oct. 30, according to Bloomberg’s calculations of the data. from the research company Kaiko.

The FTX bankruptcy started to shake the crypto sector from early November and continues to cause contagion. Bankman-Fried was arrested and charged with fraud for allegedly embezzling billions of dollars in client money.

The drop in trading volumes may in part reflect fearful investors withdrawing their coins from crypto platforms and anticipating little respite from a $2 trillion rout in digital assets since a peak in November 2021.

The public is fearful that more exchanges will fail and has been withdrawing assets from exchanges en masse, said Hayden Hughes, managing director of social trading platform Alpha Impact. Trading companies and market makers also removed assets, meaning lower overall volume.

Kaiko’s figures cover the platforms representing the majority of virtual asset exchanges, including Binance, Bitfinex, Coinbase, OKX and Kraken. These centralized platforms take custody of client assets while their much smaller decentralized rivals leave custody of tokens to owners.

Token guardianship is a topic of intense debate in the shadow of FTX. But decentralized exchanges sometimes called DEXs also suffered: their average daily volumes fell about 44% to $1.5 billion in the week of December 11, from $2.6 billion from October 24-30. , according to data from DefiLlama.

One of the challenges is that the user experience and execution on DEXs is so different from centralized exchanges, said Katie Talati, research director at digital asset specialist Arca.

Bitcoin, Ether and a gauge of the top 100 tokens are all down more than 60% this year, shaping up to be one of the worst ever in crypto.

The rapid tightening of monetary policy has undermined speculative ardor and sparked a series of explosions in risky crypto holdings, leaving many prognosticators uncertain about what kind of future awaits digital assets.

–With the help of Sidhartha Shukla.

2022 Bloomberg LP

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