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The shockwaves from FTX’s quick collapse into bankruptcy last week are raising urgent questions on the risks to financial markets beyond the troubled cryptocurrency exchange’s balance sheet. At least so far, analysts don’t believe the fallout has upended retail investors on the whole.
“We are not seeing any spill-over effects from the crypto meltdown yet,” said analysts at Vanda Research, a firm analyzing the moves and trends of everyday traders and investors, on Wednesday.
After FTX and its related entities filed for Chapter 11 bankruptcy on Friday, Vanda Research analysts looked at retail investor buying trends this week for “traditional assets” like U.S.-listed stocks and ETFs.
“There’s been no significant impact on retail’s bid for traditional assets as daily purchases has reverted to the [year-to-date] average so far this week,” they wrote in a note.
Daily retail investor inflows to U.S. stocks and ETFs have averaged $1.23 billion, according to Vanda.
In recent days, companies and ETFs giving investors indirect crypto exposure are getting less than 1% — 0.3% — of the retail investor money flowing into stock markets, the research firm said. Year to date, the daily inflows to these companies and ETFs have constituted an average 1.2% of the daily inflows.
In the past five trading days, the Dow Jones Industrial Average
DJIA,
is up more than 3%, while the S&P 500
SPX,
is up nearly 6% and the Nasdaq Composite
COMP,
is up more than 8%. Bitcoin
BTCUSD,
one of the earliest and more established cryptocurrencies, is off more than 1% in that same time.
The cryptocurrency market is “too small and too siloed to cause contagion in financial markets,” Citi analysts have said.
None of this is to downplay the gravity of FTX’s bankruptcy — or to suggest the ripple effects are complete.
In October, an estimated 19% of American adults said they own cryptocurrency, according to polling from Morning Consult. Nearly one half said cryptocurrency should be similarly or more regulated than other financial investments, the polling showed.
That’s up from 42% in January, a result that preceded bankruptcies for other cryptocurrency exchanges: Voyager Digital and Celsius Network.
To hear it from some investors who pulled their crypto holdings off FTX at the last moment, it’s been a scary couple of days.
As the case starts in U.S. Bankruptcy Court for the District of Delaware, FTX’s attorneys have said in court papers the list of creditors could surpass one million.
There are open questions regarding whether creditors — which include account holders — can recoup their assets, bankruptcy experts told MarketWatch.
When FTX filed for bankruptcy on Friday, John J. Ray, the newly-appointed CEO taking over for Sam Bankman-Fried, said FTX businesses would “develop a process to maximize recoveries for stakeholders.”
Also Wednesday, the House of Representatives Financial Services Committee said it was scheduling a December hearing on FTX’s collapse and expects to hear from Bankman-Fried.
“The fall of FTX has posed tremendous harm to over one million users, many of whom were everyday people who invested their hard-earned savings into the FTX cryptocurrency exchange, only to watch it all disappear within a matter of seconds,” Committee Chairwoman Rep. Maxine Waters, the Democrat of California, said in a statement.
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