According to JP Morgan analysts, investors are withdrawing cash from major cryptocurrency exchanges as a result of FTX’s demise.
The investment bank’s analysts claimed in a letter to investors on Wednesday that all major exchanges had outflows last week. Gemini, OKX, and Crypto.com saw the heaviest draining of funds.
The decline of FTX caused a domino effect, prompting all other exchanges to show bad results as well.
FTX depleted the sector’s liquidity and undermined investors’ trust. The growth of the exchange is also attached to several other large corporations – and if one falls, others follow through.
According to a Block Research analysis, over a hundred firms have invested in or held FTX assets.
Companies and protocols from promising cryptocurrency market segments including decentralized finance (Defi), Web 3.0, and numerous financial services have had their withdrawals blocked.
BlockFi, one of the leading cryptocurrency lending and staking platforms, is preparing to also file for Chapter 11 bankruptcy.
Investors Removing Currency From Exchanges
The FTX case caused a significant trust issue between cryptocurrency investors and exchanges.
Companies like Binance and Crypto.com are reporting a major movement of cryptocurrency withdrawal from their platforms.
The most traded digital asset, Bitcoin, was part of most of the withdrawals.
Over $3 billion in BTC were removed from exchanges in the past week. Gemini had the highest weekly drop, down about 30,000 BTC, followed by Kraken, Binance, and Coinbase.
When it comes to exchange withdrawals, the data suggests that the pattern is still in place. In the last seven days, net withdrawals have outpaced deposits on nearly all major platforms.
Government Regulation/Investigation Incoming
Many expect the fallout from FTX to be far from over. Regulators prepare additional investigations and focus on crypto in general, shaking investment trust in cryptocurrencies as a whole.
Members of the United States House Financial Services Committee scheduled a hearing in December to investigate the collapse of crypto exchange FTX and its “broader implications for the digital asset ecosystem.”
The committee expects to question those involved in FTX’s collapse. Especially the company’s then-CEO, Sam Bankman-Fried.
“The fall of FTX has posed tremendous harm to over one million users,” House Financial Services Committee Chair Maxine Waters said. “We need legislative action to ensure that digital assets entities cannot operate in the shadows outside of robust federal oversight and clear rules of the road.”