Bitcoin’s crash actually a good thing, FTX CEO hints at

RSSBot
August 11, 2021
42 Views

While the recent crash of May has had Bitcoin trading below the $30,000 mark for a while, the world’s top digital currency has shot up to about $45,000 at the time of writing. With a gain of roughly $15,000 in just a couple of weeks, the outlook for Bitcoin is looking good. The bull market seems to have never been over. According to the Chief Executive Officer of one of the world’s largest cryptocurrency exchanges FTX, Sam Bankman-Fried, May’s drop wasn’t that bad for crypto and could be considered a good thing for crypto, especially when comparing it to other past crashes. In short, lessons were learned.

The CEO of FTX certainly knows a thing or two about Bitcoin price movements and in a recent interview on Bloomberg’s “Odd Lots” podcast, he contributed the crash to the liquidation of leveraged positions in a short squeeze. However, it did not have a destructive impact and a recover followed short. Bankman-Fried said:

“There were $20 billion of long positions that probably got liquidated over a weeklong period, but the industry was able to absorb that… The infrastructure and the liquidity in this space held up much better under the liquidations than they did a year ago.”

One of the takeaways from the recent crash, is that you could say that Bitcoin has managed to become more mature as a financial asset. A few years ago in 2018, after several months of surging to the point of reaching its then all-time high of nearly $20,000 per coin in late 2017, the currency then started to drop consistently down to the $3,000 range.

While this year’s crash may have seemed much worse, it wasn’t when you consider the facts. Yes, It was surely more memorable, since Bitcoin had just reached a new all-time high of over $64,000 and everyone was ecstatic before dropping down to $30,000 for a loss of 50% in value. This was nonetheless much less harsh than what happened three years ago. And while it took many months in 2018 to somewhat recover, on-chain data suggests that Bitcoin is already on its way to the $53,000 mark and likely new all-time highs.

As for the lessons learned. Current pricing is inclusive of all the FUD that crypto had to put up with. Bitcoin seems to have withstood the “Musk-test” and shown not to be dependent on China developments as well as the threat of tighter restrictions in the U.S.

Leverage

Bankman-Fried further discussed leverage and its effect:

“I think often people want to live in a fantasy land where leverage can make markets go up but not down. That’s not how it works. For better or for worse, I strongly believe that the crypto ecosystem is in a stronger, healthier position today because of leverage.”

The young crypto-billionaire also commented on FTX’s decision of late to cut back on leverage trading:

“It wasn’t super relevant to us or most of our users or their experience. It’s also not super economically useful, frankly. [Taking on 100x or 50x leverage,] you can’t really use that to hedge something because you could get liquidated in a print.”

At the time of writing, Bitcoin is trading at $45,545 according to CoinMarketCap data.

The post Bitcoin’s crash actually a good thing, FTX CEO hints at appeared first on iGaming.

Go to Source
Author: Peter Siu

Author RSSBot