Jonah Van Bourg, Cumberland’s Head of Trading, said on Twitter that FTX’s collapse will trigger calls for significant changes in crypto markets away from centralization. He also said that these industry-defining events usually come before market recovery.
The collapse of crypto exchange FTX would trigger significant market structure changes, namely moving away from a model of all-in-one platform centralization, crypto trading firm Cumberland’s officer said.
Jonah Van Bourg – Head of Trading of Cumberland, the crypto arm of Chicago-based trading firm DRW – said on Twitter that the various functions of crypto spot trading have been trending toward a model of all-in-one platform centralization.
Referring specifically to liquidity, clearing, settlement, custody, and lending, Van Bourg said these functions were “coalescing under a very limited number of roofs.” In his words, centralized exchanges had many incentives for pushing this all-in-one model; however, in hindsight, some of these were “perverse.”
Recent events – the FTX collapse and its eventual bankruptcy – triggered a “handbrake turn,” Van Bourg said, adding that the crypto market structure seems likely to mirror foreign exchange markets. Assets and capital aren’t left on centralized exchanges in foreign exchange markets, he noted.
“Instead, digital assets will reside in countless silos around the world and the functions of custody, lending, settlement, clearing, and most importantly liquidity will be offered by an array of intermediary nodes and providers in an interconnected but non-interdependent web,” Van Bourg said.
He suggested that various regulated entities should emerge in the next year to become trustworthy providers of various well-defined market services.
Finally, Van Bourg noted that despite the turmoil last week, no relevant blockchain stopped processing blocks, concluding that “these industry-defining events are usually the predecessors of market recovery.”
Meanwhile, Circle’s co-founder and CEO Jeremy Allaire recently compared the FTX situation to Lehman Brothers’ moment, which set off the 2008 financial crisis.
“As someone who’s been involved in this industry for 10 years, it is disappointing that a technology that was spawned in reaction to the Lehman Bros. moment of 2008 has given rise to its own version of the same,” he said on Twitter.