“Companies Without a Good Business Model Will Soon File for Bankruptcy” - Gracie Chen, CEO, Bitget

Cryptocurrency exchange Bitget became one of the first to respond to the FTX crisis and offered a $5 million compensation fund for FTX users including traders, investors, and influencers. At the same time, Bitget announced an increase in its own insurance fund from $200 million to $300 million. We discussed with Bitget CEO Gracie Chen what the future holds for the industry and how the FTX crisis has affected the crypto market.

- The decreasing continued after the FTX bankruptcy news that shock the markets last week. Do you think new bankruptcies will come? How safe and healthy do you think the system is right now?

G.C.: FTX's bankruptcy might affect some upstream or downstream businesses related to the exchange. Because of the market sentiment, we expect to see some other companies which does not have a good business model, might have a high risk of bankruptcy. Our industry is in general good, as this incident just exacerbated the speed of evolution and consolidation for the ecosystem. And we predict only the stronger players will be left on the field, as well as the whole industry will move towards becoming more transparent and more secure.

- Do you observe a shift towards cold wallets by exiting the exchanges?

G.C.: While we cannot speak for other exchanges, we don't see a huge drop in users' balances stored in Bitget. On the contrary, actually we observed an increase in users since they are looking for a safe and secure place to store their assets, as Bitget has earned the trust from the general public.

- What impact will it have on the future of cryptocurrency? Will there be a serious decrease?

G.C.: Exchanges will enter a consolidation phase: With FTX near death, Binance’s leading position is even more solidified. There would be no more than 10 centralized exchanges with strong competitiveness in the industry. The exchange market will become more “oligopolistic” as a result, and the ones who are left will focus on building good products and experiences for users, rather than selling a dream.

There will be new opportunities for decentralized finance and lending. After observing three major insolvency events this year, including Luna, Three Arrows Capital, and Alameda Research, the centralized lending business has been further disproven, and people's trust and demand for "decentralized lending" will further increase, thus ushering in long-term opportunities and innovation for decentralized finance (DeFi). This will lead to the disappearance of most centralised lending businesses.

Regulation will be strengthened. Countries will have more comprehensive and detailed regulations in terms of regulatory acts, financial licensing, and investor protection, and will focus on strengthening the regulation of centralized exchanges and DeFi, with 2023 being the first year of regulation.

Cryptocurrency will have more guardrails. The industry will bid farewell to the era of barbaric unregulated growth, and asset management institutions in the industry will generally implement a set of strict risk control systems and complete audits to keep their companies running under a healthy, transparent and open balance sheet. They’ll be more active in seeking compliance licenses and the overall industry will develop in a more benign direction.

Business mergers and acquisitions will be more cautious. Previously, FTX’s mergers and acquisitions “saved” many companies that were on the verge of bankruptcy due to opaque balance sheets, but these bold moves did not empower their core business, and in turn, to some extent, led to its tightening of cash flow. After this crisis, the leading players in the industry will be more rational and prudent in their mergers and acquisitions, which will allow the good money in the industry to drive out the bad and help build a further regulated environment for development.