FTX Crisis Marks Final Event in Current Market Cycle

FTX Crisis: A Turning Point

The ongoing crisis surrounding FTX is seen by experts as potentially the last major event in the current market cycle. This perspective comes from CK Zheng, the former head of valuation risk at Credit Suisse, who is now a co-founder of the crypto hedge fund ZX Squared Capital. According to Zheng, the downfall of FTX is part of a broader deleveraging process that commenced following the COVID-19 pandemic.

The Deleveraging Process

The financial landscape has been undergoing significant changes, particularly since the pandemic's onset. This period has been marked by a series of financial adjustments aimed at reducing leverage within the market. The collapse of Terra Luna Classic, previously Terra (LUNA), further accelerated this process, leading to increased scrutiny and adjustments within the crypto market.

Impact on the Crypto Market

FTX's collapse has had substantial repercussions across the cryptocurrency sector. It underscores the vulnerabilities and risks inherent in the market. However, it also signals a potential stabilization point, as the market adjusts to the new realities of reduced leverage and heightened risk awareness. This event could serve as a catalyst for future reforms and risk management improvements within the industry.

Future Outlook

Looking ahead, the market may experience a period of stabilization as the effects of the deleveraging process take hold. The lessons learned from recent events like the FTX crisis can guide future strategies and regulatory measures. Stakeholders in the crypto market are likely to focus on enhancing transparency and risk management to prevent similar occurrences. As the market adapts, it may pave the way for a more resilient and robust financial ecosystem.