The shockwaves from the rapid collapse of bankrupt FTX last week are raising urgent questions about the risks to financial markets beyond the cryptocurrency exchange’s troubled balance sheet. At least so far, analysts don’t believe the fallout has shocked retail investors overall.
“We are not yet seeing any spillover effects from the cryptocurrency crash,” analysts at Vanda Research, a firm that analyzes the moves and trends of everyday traders and investors, said Wednesday.
After FTX and its related entities filed for Chapter 11 bankruptcy on Friday, analysts at Vanda Research examined retail investor buying trends this week for “traditional assets” such as U.S.-listed stocks and ETFs.
“There has been no significant impact on retail supply for traditional assets as day buying has returned to [year-to-date] average so far this week,” they wrote in a statement.
According to Vanda, daily inflows from retail investors into US stocks and ETFs averaged $1.23 billion.
Over the past few days, companies and ETFs that give investors indirect exposure to cryptocurrencies are receiving less than 1% – 0.3% – of retail investor money flowing into stock markets, the research firm said. . Since the beginning of the year, daily inflows into these companies and ETFs have averaged 1.2% of daily inflows.
Over the past five trading days, the Dow Jones Industrial Average DJIA,
rose more than 3%, while the S&P 500 SPX,
rose nearly 6% and the Nasdaq Composite COMP,
increased by more than 8%. BitcoinBTCUSD,
one of the earliest and most established cryptocurrencies, is down more than 1% over the same period.
The cryptocurrency market is “too small and too isolated to cause contagion in financial markets,” Citi analysts said.
None of this is to downplay the severity of FTX’s failure or to suggest that the knock-on effects are complete.
In October, approximately 19% of American adults said they owned cryptocurrency, according to a Morning Consult survey. Nearly half said cryptocurrency should be similarly or more regulated than other financial investments, the survey showed.
It is up from 42% in January, an achievement that preceded the failures of other cryptocurrency exchanges: Voyager Digital and Celsius Network.
It’s been a scary couple of days to hear from some investors who pulled their cryptocurrency holdings from FTX at the last minute.
As the case begins in US Bankruptcy Court for the District of Delaware, FTX’s attorneys said in court documents that the list of creditors could exceed one million.
There are open questions about whether creditors, including account holders, can recover their assets, bankruptcy experts told MarketWatch.
When FTX filed for bankruptcy on Friday, John J. Ray, the new CEO who took over from Sam Bankman-Fried, said FTX’s firms would “develop a process to maximize recoveries for affected parties.”
Also on Wednesday, the House Financial Services Committee said it was scheduling a December hearing on the FTX crash and expects news from Bankman-Fried.
“The fall of FTX caused massive damage to over a million users, many of whom were ordinary people who invested their hard-earned savings into cryptocurrency exchange FTX, only to see them disappear within seconds,” Maxine Waters, the California Democrat, said in a statement.