FTX Debacle Could Change Hong Kong’s Approach to Retail Crypto Regulation; Bitcoin is showing its strength


Good morning. What is happening:

Prices: Bitcoin and other cryptocurrencies

Informations: The FTX failure could change Hong Kong’s approach to regulating cryptocurrencies.

Prices

CoinDesk Market Index (CMI)

855.23

+9.2 1.1%

Bitcoin (BTC)

$16,790

+190.1 1.1%

Ethereum (ETH)

1256 dollars

+12.7 1.0%

The S&P 500 closes daily

3,991.73

+34.5 0.9%

Gold

1780 dollars

+5.9 0.3%

Treasury income 10 years

3.8%

0.1

BTC/ETH quotes for CoinDesk Indices; gold is the COMEX spot price. Prices as of 4:00 p.m

Bitcoin, Ether inch up

by James Rubin

Bitcoin showed its strength for the second day in a row, even as the post-FTX crypto world crumbled.

Investors used encouraging inflation data — a report from the Labor Department showing that supplier prices (PPI) came in cooler than expected — to keep the biggest cryptocurrency by market capitalization above $16,750, a gain of about 1% over the past 24 hours. BTC has been rising since Monday, even after cryptocurrency exchange FTX’s liquidity crisis and filings for Chapter 11 bankruptcy protection widened. On Tuesday, The Wall Street Journal reported that crypto lender BlockFi is preparing a potential bankruptcy filing due to its “significant exposure” to FTX.

This article is adapted from Market Wrap, CoinDesk’s daily newsletter on what’s happening in today’s cryptocurrency markets. Subscribe to get access to your inbox every day.

“Bitcoin is showing resilience here, but until we learn the full contagion risk associated with FTX, it’s hard to imagine investors being willing to test the waters,” wrote Edward Moya, chief market analyst at currency market maker Oanda. “If more exchanges or crypto companies stop withdrawing funds or limit activity, this will likely put pressure back on cryptocurrencies.”

Ether recently traded hands at around $1,250, up nearly 1% since Monday at the same time. Other major altcoins spent most of Tuesday in the green, even as FTX’s FTT token jumped 20%. However, FTT was recently trading at $1.81, a fraction of its high near $36 earlier this year. SRM, another FTX-related loser that fell more than 72% over the weekend, rose more than 3%. DeFi protocols in the Solana ecosystem have recently split from Serum’s onchain exchange, fearing that they don’t know who is in control. FTX CEO Sam Bankman-Fried was a key supporter of Serum.

The CoinDesk Market Index, a broad-based index designed to measure the performance of the digital asset market as measured by market capitalization, was roughly flat.

Stock markets edged higher with October’s PPI showing that the US central bank’s monetary policy is boosting inflation. The tech-heavy Nasdaq rose 1.4%, while the technology-heavy S&P 500 and Dow Jones Industrial Average (DJIA) rose 0.8% and 0.1%, respectively.

Oanda’s Moya cautioned that a possible BlockFi bankruptcy could present the cryptocurrency markets with their next big test. The lender has denied rumors that most of its assets are in FTX, but admitted on Monday that in addition to having deposits on the platform, it has an undrawn credit line from FTX and liabilities owed to it by FTX.

“The next domino to fall looks to be BlockFi,” Moya wrote. “The contagion from FTX was expected to affect BlockFi, even though most of their assets are held on the collapsed cryptocurrency exchange FTX.”

Biggest Winners

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Concepts

Will FTX Collapse Change Hong Kong’s Approach to Retail Cryptocurrency Regulation?

By Sam Reynolds

FTX’s epic crash comes at an awkward time for retail cryptocurrency traders in Hong Kong. In late October, just days before the current disaster, the Hong Kong government announced its ambitions to once again become a cryptocurrency hub and considered easing a ban on retail cryptocurrency trading.

“The SFC is actively seeking to establish a regime to permit ETFs [that] Provide exposure to key virtual assets with appropriate investment safeguards,” Securities and Futures Commission Deputy Chief Executive Julia Leung said at Hong Kong FinTech Week, as CoinDesk previously reported.

Eddie Yue, director general of the Hong Kong Monetary Authority, added that with the right regulation, these new technologies “can thrive in a healthy financial system like Hong Kong’s.”

However, Hong Kong authorities did not announce any special rules. This will follow a period of consultation with the regulators themselves and industry stakeholders.

How do you think these talks will go now that FTX has a million creditors in the bankruptcy process? The local stock exchange AAX is also on the brink of failure and is suspended until a new capital increase is secured.

Some of the million creditors listed in the FTX bankruptcy will include hedge funds, institutional investors or crypto-currency institutions – but some will also include retail investors, including Hong Kongers. If AAX goes down, who knows how many retail traders in HK will also be affected.

The result will be a strict set of rules for the retail industry. There will be restrictions on how the exchange operates. Some of them may be better, such as the required use of licensed custodians, but some may deter traders, such as restrictions on which tokens are available.

Hong Kong regulators will surely recognize the risks of having too strict regulations: Exchanges will become ghost towns and people will continue to trade offshore. But as any regulator knows, regulation is a balancing act. Let’s see what the outcome is – if Hong Kong still wants to have retail cryptocurrency trading, that is.

Important events.

15:00 HKT/SGT (7:00 UTC) Bank of England Consumer Price Index (YY/Oct)

21:30 HKT/SGT (13:30 UTC) United States Retail Sales (Month/October)

21:30 HKT/SGT (13:30 UTC) Bank of Canada Consumer Price Index Core (Year/October)

CoinDesk TV

In case you missed it, here’s the latest episode of First Mover on CoinDesk TV:

FTX Accounts Drainer Exchanges Millions in Stolen Crypto; The Role of Journalism in the Crypto Industry

Last week, whoever was behind the $600 million exploit of cryptocurrency exchange FTX began transferring millions of dollars in stolen funds. Moreover, ConsenSys Chief Economist Lex Sokolin weighed in on cryptocurrency markets as bitcoin (BTC) flirted with $17,000. And CoinDesk Chief Content Officer Michael J. Casey discussed the place of journalism in the crypto industry.

Titles

Crypto lender BlockFi prepares for possible bankruptcy filing after FTX woes, WSJ reports: Due to the bankruptcy of the cryptocurrency exchange FTX last week, the company had previously suspended withdrawals.

ConsenSys Economist still bullish on cryptocurrency after FTX fall: Lex Sokolin said that if people develop useful applications based on blockchain technology, the sector can grow.

On-chain Data Shows Investors Are Expecting, Changing Custody Behavior: Confidence in exchanges is understandably low following the collapse of Sam Bankman-Fried’s FTX. Investors may trust the asset more than the entity that holds them.

Crypto Exchange FTX Crash Sees Long-Term Bitcoin Holders Shift To Distribution: Glassnode said the continued decline in bitcoin held by long-term holders could be a widespread loss of confidence.

Serum’s SRM Tokens Doubled After Emergency Fork After FTX Hack: The price of the Serum token rose to 32 cents from a low of 12 cents just two days ago as community members of the decentralized exchange tried to implement an emergency fork following security concerns raised by the Sam Bankman-Fried’s hack. FTX exchange.



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