Crypto survived worse than the fall of FTX: Chainalysis

Blockchain analytics firm Chainalysis compared the fall of Mt. Gox to FTX to determine the impact of FTX’s bankruptcy on the ecosystem.

He concluded that FTX was a relatively smaller part of the crypto industry than Mt. Gox was at the time and that the industry should rebound stronger than ever.

In a November 23 Twitter threadChainalysis research manager Eric Jardine began his comparison by first looking at the two companies' market share, finding that Mt. Gox averaged 46% of all exchange flows during the year before its collapse in 2014, compared to FTX’s average of 13%, which ran from 2019 to 2022.

Jardine notes in 2014 when Mt. Gox collapsed that centralized exchanges (CEX) were the only players in the game, while by the end of 2022 almost half of all exchange flows were captured by decentralized exchanges (DEX) such as Uniswap and Curve.

Exchange entries of CEX versus DEX between 2013 and 2022. Source: Chainalysis

Jardine, however, mentions that FTX was slowly gaining market share while Mt. Gox was seeing theirs steadily decline, and that the trade trajectories are worth considering, adding:

“Mt. Gox was becoming just one exchange during a period of growth for the category, taking a smaller slice of a bigger pie. FTX, on the other hand, was taking a bigger slice of a shrinking pie , beating other exchanges even as its gross tx volume declined.

Despite this, Jardine concluded that Mt. Gox was a “kingpin of the CEX category at a time when CEX was dominant,” making it a more important part of the crypto ecosystem at the time of its collapse than FTX.

Jardine then goes on to examine the recovery of the crypto industry after the fall of Mt. Gox and found that while on-chain trading volume was flat for about a year, activity quickly picked up.

In February 2014, Mt. Gox suspended operations, shut down its website, and filed for bankruptcy after losing 850,000 Bitcoin (BTC) in a hack.

Customers who had assets deposited on the exchange still have not recovered their funds, but the Mt. Gox trustee announced Oct. 6 that creditors have until Jan. 10, 2023 to select a repayment method for the 150,000 BTC that would be in their possession. .

Jardine believes that while there are other factors such as Sam Bankman-Fried’s large public presence, the “comparison should give the industry optimism” because when it comes down to market fundamentals, “There’s no reason to think the industry can’t bounce back from this, stronger than ever.