Cryptocurrencies suffered a huge loss in 2022. The decline, especially after the glorious 2021 year, affected the crypto money companies operating in the field as well as the coin prices. “Crypto Valley”, similar to Switzerland’s “Silicon Valley” related to Blockchain, is expecting a “major reset” after the spectacular and sudden drop of crypto exchange FTX. Here are the details…
Cryptocurrencies have suffered a great decline
Switzerland has seen an influx of funds in recent years in terms of cryptocurrency and blockchain startups, drawn by favorable tax rates and rules and a pleasant political and legal infrastructure. More than 1,000 such companies have opened offices, most of them south of Zurich, in the canton of Zug, in the wealthy Alpine country that even accepts tax payments in Bitcoin and ETH. However, the dramatic bankruptcy of FTX, and then Genesis, once the world’s leading crypto exchange, last November dampened the frenzied enthusiasm that had long characterized the industry.
“A lot of things happened in 2022,” said Dirk Klee, head of Bitcoin Suisse. Adding to the FTX debacle, it marked the collapse of stablecoin Terra/Luna, which was supposed to be pegged to the US dollar last May. Liquidation of Singapore-based cryptocurrency hedge fund Three Arrows Capital, as we have also reported as Kriptokoin.com; and also pointed to the collapse of cryptocurrency investment platform Celsius. “These developments have exposed the weaknesses of some institutions that are not yet following regulatory processes,” Klee said, but stressed that the crypto space is still a “young industry.” “What happened was not due to a fault in technology, but to the mismanagement of central financial institutions,” he said.
FTX pushed the field back 1-2 years
According to the Bank for International Settlements (BIS), nearly $450 billion evaporated in the market turmoil that followed the Terra/Luna collapse, while another $200 billion disappeared after FTX went bankrupt. Mathias Ruch, founder and chairman of CV VC, a venture capital fund focused on blockchain start-ups, stated that the fall of FTX co-founder Sam Bankman-Fried was “a very bad event for the field”. will take it back a year or two,” he predicted.
As the crypto winter begins, many of the concerns revolve around finances. Crypto Valley Association Vice President Jerome Bailly warned that small start-ups may find it more difficult to “get through this difficult period.” Both Bailly and Ruch compared the turmoil in the industry to the bursting of the dot-com bubble in 2000. “I think it’s a phase very similar to the internet bubble,” Ruch said. “People got greedy, they didn’t do their due diligence, and it was the small investors who were hurt. History repeats itself,” he added.
However, suggesting that this may not be a bad thing for the industry, the president pointed out that technology giants such as Google and Amazon have risen from the ashes of dot-com. “I think the opportunities are huge,” he said. Emi Lorincz, president of the Crypto Valley Association, agrees. “I believe we will see a major reset in the industry,” Lorincz said. The industry is preparing for tighter regulation after the explosions, and Swiss authorities have already begun to toughen their stance. Darko Stefanoski, a partner at auditing and consulting firm EY, said Switzerland is “on the right track” and finance watchdog Finma has already set rules for the industry.
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