Original title: Crypto’s First Year After the FTX Blowup: ‘It’s Been Miserable’

Original author: Bloomberg Crypto Michael P. Regan & Anna Irrera

Compiled by: Odaily Planet Daily 0xAyA

As the case of Sam Bankman-Fried heads to trial, many cryptocurrency players remain in survival mode.

Sara Feenan took the risk in 2017 by leaving her career in finance and entering the brave new world of crypto.

Feenan, who has worked at a blockchain technology company and Binance exchange over the past few years, was excited about being part of a movement that promised to transform and improve nearly everything. She even named her dog after Bitcoin’s inventor. Then, amid the turmoil of 2022, the FTX exchange experienced a stunning bankruptcy in November. As the chain reaction continued in the months that followed, Feenan, whose most recent job was at a startup, found herself out of work, after which she left the cryptocurrency industry.

“I’m a little disappointed,” said Feenan, who now works at a non-cryptocurrency fintech startup in London. “Things like FTX are a little irritating. If you tell people you work in crypto and something like this just happened, it’s hard to say that people here aren’t scamming people for a living.”

While a cloud of doubt and suspicion has hung over this emerging asset class from the beginning, it has perhaps never been as heavy as it has been in the months since the downfall of FTX and its mysterious leader, Sam Bankman-Fried. That cloud of doubt and suspicion is unlikely to dissipate any time soon, as SBF is charged next week as the mastermind of one of the largest financial frauds in U.S. history — despite pleading not guilty to a host of charges against him.

Of course, nothing drives sentiment more than price. While Bitcoin has rebounded about 60% this year to trade around $27,000, it remains well below its record of $69,000 set in November 2021 and has been stuck in a trading range for much of the year. What was once a nearly $3 trillion market cap is now worth only about $1 trillion. The dream of Bitcoin or any other cryptocurrency token becoming a true alternative currency remains just that, a dream.

Trading has dried up, and once-hot corners of the market, like NFTs, now look like the digital tulips that critics have long said they were. According to researchers at dappGambl, 95% of the more than 73,000 NFT collections are essentially worthless. The researchers cited data from The Block, saying that weekly NFT trading value in July was about $80 million, just 3% of the peak in August 2021. Remember NBA Top Shot, the much-hyped NFT project from Dapper Labs that turned basketball highlights into tradable tokens, some of which sold for more than $200,000 in 2021? Now there are hundreds of those tokens sitting idle, waiting to be sold, with asking prices as low as $1.

Crucially, the venture capital community’s previously loose purse strings have tightened significantly. This year, venture capital deals for cryptocurrency and blockchain projects totaled about $7.3 billion through Sept. 19, according to Pitchbook, or a quarter of the total for all of 2021 and 2022. And jobs in the industry are shrinking. While the cryptocurrency industry’s workforce grew more than 18% in early 2022, jobs have been falling throughout the year, with the most recent decline exceeding 5%, according to Revelio Labs, which tracks 35 large companies.

“Honestly, it’s painful,” said Nico Cordeiro, chief investment officer at crypto hedge fund Strix Leviathan. “Revenues are minimal because of market conditions. You can’t attract new investors because no one is investing in this space. Players in this industry are in survival mode: trying to keep operations going as long as possible until money starts flowing back into the space.”

Strix Leviathan used FTX’s offshore exchange to trade perpetual cryptocurrency futures that were unavailable on U.S. exchanges, but now still has funds locked up in the bankrupt exchange through a major brokerage. The company has stopped trading perpetual futures due to concerns that there is no safe place to trade, as FTX’s main competitor Binance has also come under increasing regulatory scrutiny.

It’s been a tough road for those who have successfully launched crypto-related businesses in the post-FTX era. Hilal Diab started his company Market Mapper, a platform that provides blockchain analytics for traders, in January in Tel Aviv, Israel. But he soon ran into trouble finding a major online advertising platform willing to take on his business. He said that when he tried to sign up on Mailchimp to publish Market Mapper’s newsletter, the company told them to find another service provider because it didn’t want to be associated with the cryptocurrency industry. Even his friends and family were wary of the idea.

“As soon as I tell people my startup is related to crypto, they get nervous. That’s the number one reaction I get,” he said. “And some investors are very skeptical about giving us money, especially after the FTX mess. They’re afraid of getting sued.”

These lawsuits and various other cases have been piling up in the wake of FTX’s bankruptcy and last year’s cryptocurrency crash. In addition to FTX’s own bankruptcy and Bankman-Fried’s upcoming criminal case, cryptocurrency firms Genesis Global, Celsius Network, Voyager Digital, Three Arrows Capital and BlockFi Inc. have all been embroiled in bankruptcies and related legal proceedings. Last Friday, Three Arrows co-founder Su Zhu was detained in Singapore and faces potential jail time along with co-founder Kyle Davies for refusing to cooperate with liquidators’ investigation of the failed hedge fund.

Meanwhile, Coinbase Global Inc. is battling the U.S. Securities and Exchange Commission over charges that many of the cryptocurrencies traded on its exchange are unregistered securities, while also lobbying Congress and making inroads overseas.

Meanwhile, Binance has been embroiled in enforcement actions by the Commodity Futures Trading Commission (CFTC) and the SEC. Even Bankman-Fried’s parents have been caught up in a lawsuit aimed at recovering funds they received from FTX.

Surprisingly, however, the courts are also a rare source of optimism that may well help crypto prices find a reason to take a breather, according to Reena Aggarwal, a finance professor at Georgetown University. She cited an appeals court ruling last month that overturned the SEC’s decision to block Grayscale Investment LLC’s proposed spot bitcoin exchange-traded fund, as well as another judge’s ruling that Ripple Labs’ XRP tokens were not securities when sold to the general public.

“The SEC has been trying to enforce and say crypto is the Wild West and we need to regulate, but the courts have fought back,” she said. “In a sense, this has given the industry new life.”

Indeed, with BlackRock Inc., Fidelity, Franklin Templeton and others looking to eventually get their spot bitcoin ETFs approved, and traditional Wall Street firms busy with blockchain projects aimed at converting traditional assets into digital tokens, the future of crypto innovation has arguably never been closer to compliance.

As for London-based crypto exile Feenan, whose dog Toshi is named after bitcoin’s mysterious inventor Satoshi Nakamoto, she herself isn’t ready to give up on the digital asset industry forever.

“Crypto can go from profound to really stupid in a very short period of time,” she said.

“If an interesting project comes up, if I think it will help move the needle, I’ll come back.”