American blockchain analysis firm Chainalysis believes that although the collapse of crypto exchange FTX has shaken the industry, the crypto space has survived worse incidents and will surely bounce back.
Crypto Thrived Despite Mt. Gox’s Downfall
Mt. Gox was established in 2010, and by 2014, the exchange was processing about 70% of all Bitcoin (BTC) transactions before it was hacked. The attackers stole about 850,000 BTC worth over $450 million at the time, and the exchange went bankrupt after the incident.
Mt. Gox recovered only 200,000 of the stolen coins, while the remaining assets were lost or removed from the network.
To dispel fears about the survival of the crypto industry, Jardine detailed the implications of the failure of both exchanges.
Firstly, the Chainalysis research lead compared the prominence of Mt. Gox and FTX within the entire crypto exchange ecosystem. He explained that before their collapse, Mt. Gox averaged 46% share of exchange inflows while FTX had 13%.
Jardine noted that while Mt. Gox was “a bigger industry player” during its time, the firm’s share in overall exchange activity was decreasing while that of FTX was increasing. However, the volume of raw cash inflow at Mt. Gox was rising while that of FTX declined.
FTX Was Taking a Bigger Share of a Shrinking Pie: Jardine
Furthermore, the research lead pointed out a significant difference between 2014 and now — the decline in the use of centralised crypto exchanges. He explained that decentralised exchanges (DEXs) are now taking almost 50% of exchange inflows, while centralised exchanges (CEXs) were the “only game in town” as of then.
“Put simply, Mt. Gox was becoming one exchange among many during a period of growth for the category, taking a smaller share of a bigger pie. FTX, on the other hand, was taking a bigger share of a shrinking pie, beating out other exchanges even as its raw tx volume declined,” he stated.
Interestingly, after Mt. Gox’s collapse, on-chain transaction volume stagnated for about a year but picked up again and continued growing.
Jardine believes the comparison should give the crypto industry optimism, as Mt. Gox was bigger than FTX when it fell.