How the collapses of FTX and SVB impacted Bitcoin
Within the space of six months two major financial institutions failed. FTX, one of the biggest and most prominent crypto exchanges, imploded and filed for bankruptcy in November, 2022, sending shockwaves throughout the crypto world. Bitcoin fell 22 percent after the news spread.
For those who thought the world of fiat currency was safer, the collapse of Silicon Valley Bank hit hard in February, 2023. For a brief period, USDC, meant to be one of the safest assets in crypto, lost its dollar peg. While regulators worked out a solution, the entire banking sector was stressed.
What impact did these two seismic events have on the behavior of people holding Bitcoin, which has been a time-tested fixture of the crypto ecosystem and performed robustly through many cycles since 2009?
MetricsDAO analyst 0xham3d set out to find and compare the impact of the two events on Bitcoin. The analyst used the following metrics, starting a month before FTX’s demise (October, 2022) until after SVB’s collapse (March 2023): daily transactions and active unique user counts, daily transferred volume and paid fee, daily swapped volume from/to on event’s date, and top 10 assets swapped from/to BTC on event’s date.
Here’s what 0x27da found:
- Since November, Bitcoin transactions have increased but the number of active users has stalled. Recent events have played a role in shaping these metrics.
- Swaps activity spiked after the FTX event, and then again - to a lesser extent - after SVB’s collapse. There was a sharp rise in active unique buyers and sellers after both events. The most swapped assets after both events were WETH and WBTC. The following chart shows the most popular assets on Ethereum blockchain.
Not surprisingly, a large number of users were actively moving their BTC holdings around in both November and March, right after the two events, for the twin purposes of safety of their funds and taking advantage of market fluctuations.
- The impact on transfer volume is clear, with the data showing that the demise of FTX impacted transferred volume much more - falling below a third in a few days - than the collapse of SVB. This might be because FTX was a major part of the cryptocurrency ecosystem while SVB was a bank and investor in fintech, dealing mainly in fiat currency.
- The twin failures had a major impact on Bitcoin’s transaction fees. Even before the collapse of FTX, the daily average transaction fees were on the rise. But this rise accelerated sharply after the events, due to market panic and higher network traffic. However, contrary to what we saw for transferred volume, SVB’s collapse had a much larger impact on average fees than FTX did as the charts below show:
Final takeaway: As 0x27da found, the implosion of FTX and collapse of SVB both highlight the importance of following market trends and major events that can impact holders of Bitcoin and other cryptocurrencies.
It is worth noting that the impact of these events on Bitcoin trading is likely to be temporary, even if there is high volatility shortly after. The Bitcoin ecosystem has shown resilience in the face of past crises and that is likely to be the case going forward when it comes to isolated failures of crypto or financial organizations.
While we cannot foresee the future, often news starts trickling out a couple of days in advance about issues with an exchange or bank, which can develop quickly into a major event. Keeping track of these developments will help users reduce their risk and grow their wealth.
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