Post-FTX contagion effects and risk factors for market participants

An in-depth analysis of Genesis, GBTC, DCG, and more

This report acts as a follow-up to Crypto Finance’s “The Collapse of FTX, a post mortem report” and analyses the contagion effects which have ensued due to the fall of one of the largest centralized exchanges in the cryptocurrency space. Large market participants, such as Genesis, Grayscale, and DCG, and retail-focussed cryptocurrency companies, like Gemini and BlockFi, have suffered severely from the Luna crash of May and the FTX crisis of November.

Over-leveraged trading strategies during the 2020-2021 bull market have ultimately led to organizations collapsing on top of each other. The values of crypto assets and blockchain technology are not the root cause of the current market environment, but the financial engineering of the current crypto asset ecosystem has significantly weakened it.

To restore trust, enforce regulation and build resilience in the industry, this report suggests applying a hybrid regulatory set-up, which takes full advantage of frameworks found in the traditional financial world (auditing, risk management, governance, KYC), while leveraging the unique capabilities offered by public blockchains (transparent transaction monitoring, Proof of Reserves and Liabilities, crypto compliance).

Please find the full report by clicking here.

All information mentioned above is provided for general information purposes only and with no warranty or liability for accuracy, completeness, or fitness for a particular purpose. No information provided in this document constitutes or is intended as investment advice. This document is not, and is not intended as, an offer, recommendation, or solicitation to invest in financial instruments including crypto assets. Crypto Finance is a financial group supervised by the Swiss Financial Market Supervisory Authority FINMA on a consolidated basis with Crypto Finance (Brokerage) AG as a securities firm and Crypto Finance (Asset Management) AG as an asset manager for collective investments with the corresponding FINMA licenses. This document and its content including any brand names, logos, designs, and trademarks, and all related rights, are the property of the Crypto Finance Group and Deutsche Börse Group. They may not be reproduced or reused without their prior consent.

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