Key Insights
- Crypto has survived worse than the FTX debacle.
- The chainalysis comparison revealed that Mt. Gox had more trading volume than FTX.
- Industry players believed that the effect of the FTX collapse is less compared to Mt. Gox.
The FTX collapse has an immediate and long-term effect on the crypto ecosystem. However, experts and industry players opine that the crypto industry has witnessed worse events in the past.
Of significance is the Mt.Gox exchange collapse in 2014. Reports showed that the incident leading to the Mt.Gox collapse shook the crypto world. Being the first crypto exchange, the collapse shook several investors.
Fast forward to 2022, industry players compare the FTX and Mt .Gox collapse. One of those comparisons that have received reactions is that of Jardine Eric, a research lead at Chainanalysis.
Comparing FTX & Mt. Gox Crypto Collapse
Mt. Gox, a Japan-based and the first crypto exchange, was hacked in February 2014. Reports showed that the hack led to the loss of about 700,000 Bitcoins (BTC) — 6% of the entire Bitcoin supply as of 2014.
- Advertisement -
Furthermore, in 2014, Mt. Gox had 46% of exchange inflows while FTX had 13%. This showed that the exchange inflow was more than that of FTX before filing for bankruptcy. With this figure, Jardine Eric opined that Mt. Gox is a bigger industry player than FTX.
Similarly, as of 2014, there were a limited handful of crypto exchanges, unlike now that they are spared across the internet. The basis of this is that more people had fewer options, and the collapse of one would have more impact— compared to now that there are more diverse exchanges.
Jardine Eric said the comparison would give the industry optimism, adding that Mt. Gox rebounded relatively fast. They concluded that the crypto industry had survived worse than the FTX debacle. Chainalysis tweeted, “this is not the time crypto has faced significant turmoil related to the collapse of an exchange.”
Furthermore, Jardine Eric is optimistic that FTX will bounce back. He said, “it can bounce back from this, stronger than ever.”
- Advertisement -
Changes in the Crypto Market; Then and Now
Comparing the FTX debacle of 2022 with the Mt. Gox collapse of 2014 requires an in-depth analysis of the market.
In the report by Jardine Eric, a research lead at Chainalysis, there were predominantly centralized exchanges (CEXs) in the crypto ecosystem. Centralized exchanges were the only players in the ecosystem. However, in 2022, half of all the changes in the crypto ecosystem are Decentralized exchanges (DEXs).
Furthermore, after Mt. Gox collapsed in 2014, it took about a year for the on-chain transaction volume to return, and the volume increased twice. Within the first year of the collapse, on-chain transaction volume was stagnant. Meanwhile, shortly after the FTX debacle, investors have begun moving assets off exchanges to self-custody.
Similarly, the crypto ecosystem now has several use cases compared to eight years ago. There are now lending features, leverage tools, and other trading forms in the industry. These use cases allowed investors to diversify, unlike in 2014, when the use cases were limited.
