Crypto-focused smallcap DigitalX welcomes regulations after FTX saga, sees a future yet for crypto

Thu 08 Dec 22, 12:35pm (AEST)
A digital render depicting a singular bitcoin token placed underneath a downtrending red arrow, in the background, a blue futuristic theme
Source: iStock

Key Points

  • DigitalX chief Lisa Wade says the sector has been “screaming” for more government regulation, contrary to ‘decentralised finance’ crowd
  • Mastercard executive also told a conference this week the company sees the FTX saga as a reset for crypto; new era of diligence to emerge
  • With all of that said, anyone who bought crypto last year and never sold remains out of pocket; as do a myriad of FTX investors

As the world of crypto recoils from another high-level scandal wiping out billions of dollars with the collapse of FTX, it’s hard to find voices of calm or reassurance right now. Unless you look to DigitalX (ASX:DCC).

Before we dive into that, let’s look at the background context. 

Mistrust for crypto, which is ultimately still a largely experimental digital asset “class” (if you can call it that), has come to define the zeitgeist once again with the FTX saga being the final straw for more than one camel. 

Canada’s largest pension fund, CPP Investments, announced overnight it had formally retired its investigation into possible cryptocurrency investments following the FTX issue.

The CEO of leading crypto firm Coinbase has also said he expects his company’s revenues to drop by up to 50% due exclusively to the FTX collapse. 

Australian impact 

In Oz, the FTX collapse directly led to Australian-headquartered cryptocurrency trading exchange Swyftx cutting 90 jobs this week, after it already did the same earlier this year once bitcoin prices first began tanking from 2021 record highs. 

(That was not enough to stop Swyftx from advertising through the 2022 AFL season.) 

FTX founder Sam Bankman-Fried is also now the subject of a federal US inquiry into market manipulation

All in all, the general vibe in the room is that those who publicly and regularly advocate crypto are feeling a little embarrassed, and, those who have never believed in it to begin with are feeling confident in their forecasting abilities. 

Then there’s DigitalX 

All of this new drama in the crypto circuit, however, has not been calamitous enough to shake the calm from the voice of DigitalX chief Lisa Wade. 

“As has been widely reported, November proved to be one of the most challenging months for digital assets to date as a result of the collapse of FTX,” Wade said. 

“Undeniably there was contagion due to the interconnectivity of FTX’s sister company Alameda Research which on-lent funds to multiple parties in our industry.” 

This contagion effect Wade directly attributed to the underperformance of cryptocurrencies (or, in her words, digital assets) when compared to the stock market. 

Regulation as a good thing

The DigitalX chief also sees a growing gap between the performance of cryptocoins and stocks getting worse in the near-term future. 

However, in what was once a rarity for the crypto sector, Wade is bullish on more government regulation and centralisation—not less. 

“The veiled positive from all of this appears to be our industry more rapidly advancing towards the regulatory oversight we have been screaming for,” Wade said. DigitalX had no funds in FTX. 

Wade isn’t alone, either. 

Worth noting is that Mastercard’s startup chief Grace Berkery told a conference this week the FTX saga is likely to usher in a new era of diligence and regulation for the crypto space, which is what large institutions want under their belt, as opposed to retail users. 

How long, exactly, the largest and most influential cryptocoins - Bitcoin and Ethereum - will take to get back to their 2021 highs (assuming they ever will) remains anyone’s guess.

NFTs, meanwhile, nobody is giving sympathy to.

DCC's one year chart reflects the same journey most cryptocurrencies have taken through a brutal 2022
DCC's one year chart reflects the same journey most cryptocurrencies have taken through a brutal 2022


Written By

Jonathon Davidson

Finance Writer

Jonathon is a journalism graduate and avid market watcher with exposure to governance, NGO and mining environments. He was most recently hired as an oil and gas specialist for a trade publication.

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