Crypto

ARK Invest Says FTX Collapse “Could Set Institutional Crypto Adoption Back by Years”

Cathie Wood’s investment management firm is among the DeFi stalwarts domino effect warning failure of FTX cryptocurrency exchange may have on the industry.

ARK Invest said on Tuesday that the fall of the once lauded company of Sam Bankman-Fried has had a huge impact on the reputation of crypto and could be a major setback in the progress towards wider acceptance while ushering in too much regulatory action. restrictive.

“In our view, the insolvency of FTX is one of the most damaging events in crypto history,” ARK said in a newsletter authored by research director Frank Downing and analyst Yassine Elmandjra. “This could set back the adoption of institutional crypto for years and perhaps give regulators an opportunity to take drastic action.”

ARK Invest is the fourth shareholder of Coinbase (PIECE OF MONEY), with more than 7.7 million shares or 4.3% stake in the publicly traded crypto exchange as of Sept. 30, according to data from Bloomberg. The company also doubled its position as the turmoil in the crypto space unfolded over the past week.

Coinbase said it had minimal exposure to FTX, but the extent of the contagion remains unclear.

MIAMI, FL – APRIL 7: Cathie Wood, Founder and CEO of Ark Invest speaks at the Bitcoin 2022 Conference on April 7, 2022 in Miami, Florida. (Photo by Marco Bello/Getty Images)

In any case, institutional investors have warmed to the space over the past few years. A recent survey of Fidelity found that 74% of institutions surveyed announced their intention to buy digital assets.

A lack of legislation, however, has kept the cryptoworld in a regulatory gray area. And now there are fears that the FTX crisis is motivating federal watchdogs to overcompensate.

“FTX’s implosion should be a wake-up call for Congress and financial regulators to hold this industry and its leaders accountable,” said Senator Elizabeth Warren. said in a tweet on Friday, calling for stricter rules and enforcement. “Too much of the crypto industry is smoke and mirrors.”

ARK highlighted a response from Coinbase CEO Brian Armstrong to Warren’s call.

“The problem is that the SEC has failed to create regulatory clarity here in the United States, so many American investors (and 95% of business activity) have gone overseas,” Armstrong said on Twitter last week.

The ripple effects are already being felt in space. BlockFi, a digital asset lender that received a bailout from FTX earlier this year, has suspended customer withdrawals. Voyager is ending a deal to sell itself to FTX and is looking for new bidders, and Genesis said $175 million in funds were tied up when the exchange collapsed.

Wood and ARK, who earlier this year set a price target of $1 million on Bitcoin by 2023, remain crypto bulls despite recent events. The firm also said silver linings of FTX’s demise were that Bitcoin and Ethereum “didn’t skip a beat,” and the crypto market punishes centralized entities that lack transparency, pushing the ecosystem towards more decentralization and transparency.

“ARK’s belief in the long-term promise of public blockchains across money, finance, and the internet does not waver,” the company said. “While the crypto asset market may suffer from short-term selling pressures and liquidity shortages, we believe this crisis is purging the bad actors and will improve the health of the crypto ecosystem with more transparency and decentralization to more long term.”

Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc

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