Crypto Traders Pull Back Since FTX Collapse

The collapse of FTX and about 130 of its affiliated companies has reportedly led crypto traders to turn cautious and has reduced liquidity across the crypto markets.

The drop in liquidity — which has happened as a result of traders pulling bids and asks in order to regulate risks — is likely to continue for at least the short term, Bloomberg reported Monday (Nov. 21).

This means that crypto users will have a harder time trying to buy or sell their assets, leading in the big picture to a more volatile market, according to the report.

By one measure, the liquidity of the market is the lowest it has been since early June, the report said. At the same time, some large crypto market makers remain active and have even seen an uptick in trading activity. What’s more, on major decentralized exchanges, there’s been a 45% surge in total volume in the past 30 days.

The fallout around FTX could have some benefits, as market players could change how they trade, lend and borrow. Plus, decentralized exchanges and cold storage wallets could continue to draw greater interest.

This report comes the day before a first-day motions hearing on FTX is set before a U.S. bankruptcy judge on Tuesday (Nov. 22).

As PYMNTS has reported, the number of customers suffering fallout from the collapse of what was once one of the crypto industry’s largest players could number up to one million.

FTX is far from the first cryptocurrency exchange to collapse, and the Web3 industry is known primarily for its volatility, but FTX’s demise has been especially jarring given the reputation it enjoyed for being a supposedly reliable actor in a still-nascent marketplace.