The Impact of the Crypto Downturn and Ftx Scandal on Global Financial Markets

The fall of FTX in general has dealt an undeniable blow to cryptocurrencies. It gave fuel to an already existing fire in the major cryptocurrency Bitcoin and other important ones that follow its lead. Right now, Bitcoin is trading at around $16,000 per unit, which is nearly a quarter of its peak value, and it can still fall some more. This makes its holders anxious and has implications for the global financial markets.

But indeed, cryptocurrencies should not have to suffer the same fate as FTX. After all, corruption has existed since the beginning of human history, and it has wreaked havoc on companies that worked in the financial sector without having much to do with the crypto sphere. Enron and Bernie Madoff are just a few examples. FTX’s story does not have to end with the death of Decentralised Finance (DeFi). Still, portfolios will likely change as a result.

For one thing, investors will now seek to avoid unregulated investments like digital tokens, since poor oversight and regulation were among the key reasons behind the collapse of FTX and the loss of fortunes. The sense of risk around those assets has become heightened, and investors will now move their capital to more regulated arenas like bonds and stocks. In the near term, bonds can be more attractive given the current hawkish tone from central banks, but stocks will be the winners in the long run.

Unlike cryptocurrencies, stocks are shares in productive companies that generate value for a wide range of stakeholders, including customers, employees, shareholders, and society at large. Investors will be compelled to invest in those real businesses, especially at currently discounted prices. Traditional investors have long believed that Bitcoin and other similar coins hold no intrinsic value, and they have all the reason to believe so as its price pattern looks almost identical to Gartner’s hype cycle. If they continue to follow that trajectory, cryptocurrencies still have room to grow but very slowly, and their price may not spike as expected unless their capacity grows significantly.

Companies in the mineral exploration space, like Tarku Resources, Gold Line Resources, and several others that we feature on our channels, have healthy fundamentals, and therefore their valuations can grow should their projects move forward toward becoming mines. Some of these companies are already in the post-revenue stage.

The fact that the correlation between cryptocurrencies is high gives another reason to investors to divest some of their holdings in those tokens. Investors would want a degree of diversification in their portfolios, and cryptocurrencies do not achieve that goal since they often move in tandem. As such, stocks again are a good choice.

The recent events are not unprecedented, and while they did cause some damage to the reputation of cryptocurrencies, those currencies are still trading at high valuations compared to their initial years. Should they evolve, they can recover some of their lost value, but it is too early to predict such an evolution. All in all, this is healthy for stocks, which are benefiting from a flight of capital by worried investors who want less exposure to unregulated tokens (which may not be even assets, to begin with), and more exposure to businesses that can contribute to economic growth and the fight to protect the environment and societies from climate change. This seems to be a wise bet at the moment.

At Global One Media, we help investors make intelligent investment decisions by shedding light on the fundamentals of those companies and speaking with their leaders to showcase how they generate value. Follow our channels to build a healthy portfolio.