What if the crypto ecosystem had never been better?

What if the crypto ecosystem had never been better?

Unless you live on another planet, no one has been able to escape the fall of FTX. It's been all over the front pages of the papers, played over and over on TV and radio, an avalanche of news that gives the impression that the whole ecosystem is in ruins. But what is really going on? We investigated 🔎.

Test around you: ask "how are the cryptos" to a friend, colleague, relative, whoever you like. Their answer will be almost the same.

Inquisitive tone: "It's carnage there, isn't it?"

Concerned tone: "Oh yes, it's very very very very hot"

Peremptory tone: "Cryptos are finished"

For the past three weeks, the media have been talking ONLY about the fall of FTX and its consequences. The Big Whale team has never been so much in demand to comment on an affair which, with so many subjects on TV and radio, gives the impression that the whole ecosystem has collapsed... 🤯

But is this really the case?

While the markets are not at their best - bitcoin is trading below $17,000 - the industry is actually holding up rather well. "Let's make no mistake. It's only part of the ecosystem that's been affected," sums up Alexandre Stachtchenko, head of blockchain & cryptos at KPMG France.

This "part" of the ecosystem is the financial intermediaries that make it possible to buy and sell crypto-assets. With the meteoric rise in prices since 2020, platforms like FTX have seen their business explode to the point of taking on an outsized role 🚀

The world leader, Binance, passed the 100 million customer mark in 2021, a figure that would make any bank green with envy. By way of comparison, Europe's largest bank, HSBC 🇬🇧 , has "only" 40 million customers.

But the sudden downturn in share prices at the start of 2022 undermined this fine mechanism, and the dominoes began to fall. First in the spring with Terra (Luna), then with Celsius, until the fall of... FTX.

As Binance boss "CZ" reminded us, several crypto lending platforms and companies are still going to "disappear". American BlockFi, for example, has just bitten the dust. It announced this week that it was filing for Chapter 11 bankruptcy protection in the United States. All eyes are also on Genesis - a subsidiary of US giant Grayscale - which could tip over the edge and further exacerbate the crisis....

Meanwhile, all is "rather" well in the rest of the sector 😅  

👉 The boom in self-custody

First of all, there are the direct "beneficiaries" of the weakening of the exchanges, even if they obviously reject this label. This is notably the case with France's Ledger. "We have never sold so many Nano", confirms its CEO, Pascal Gauthier.

Since the collapse of FTX, the world leader in digital asset preservation has been selling tens of thousands of products a day - compared with a few hundred or a few thousand at best in normal times.

In November, the $1.5 billion company surpassed the 5.5 million hardware wallets sold since it was founded.

The other digital asset preservation specialists are also in good shape. Fireblocks, which offers MPC (multiparty computing), i.e. a solution for keeping crypto assets without hardware, has seen its business volume grow.

"The business is very resilient. We have a lot of new customers who have understood the importance of self-custody," confirms a spokesperson for the US company.

👉 DeFi in good shape

Same tone of voice on the decentralised finance side, where the virtues of a more transparent and auditable system are emphasised. "DeFi won't solve all the problems, but what has happened over the last few months is clearly an accelerator," insists Julien Bouteloup, founder of StakeDAO and a member of the DeFi Curve protocol development team.

In mid-November, the level of funds deposited on the DeFI Morpho protocol 🇫🇷 exceeded $250 million, more than on Solana, which is impacted by the fall of FTX (find our survey).

A view shared by other DeFi players. "Nothing like what happened with FTX is possible with Aave or Coumpound," stresses Laszlo Szabo, co-founder and CEO of Kiln, a company specialising in staking.

As a sign of the trend, Kiln has just raised €17 million in a Series A round from several heavyweight players such as Kraken Ventures. "The value of the assets we manage has fallen with the Bear Market, but we have never had so much demand", adds Laszlo Szabo. The Paris-based start-up now manages just over $600 million worth of cryptos. A record.

👉 A period of maturity

Kiln is not the only company to have raised funds. As mentioned above, Dogami also raised just under €10 million.

According to the latest figures from Crypto Valley Venture Capital (CVVC), the European ecosystem raised a total of $1 billion in Q3, as much as in Q1 2022 and slightly less than in Q2 ($1.4 billion) 💶.

In fact, crypto funds have never had so much money. They're just still a little more selective. "We need to let things settle down and return to more realistic valuations," explains Luc Jodet, head of the Web3 & Crypto fund at XAnge.

This type of period is indeed conducive to a sort of clean-up of the sector. "We've seen everything and anything go by for two years, and the crisis will allow us to clean house," confirms a crypto business angel for his part. "The Bear Market will do its work and the clowns will leave", emphasises another.

The NFTs sector is one of the most significant from this point of view.

The market literally exploded in 2021 with new collections being launched every week. While some, like Bored Ape (find our survey), have managed to make a good name for themselves, others have almost disappeared from circulation.

"The sector is maturing. There's a kind of frenzy, but the recent downturn hasn't dampened the momentum in any way. There are still just as many projects and more and more serious players," explains Lucie-Eléonore Riveron, director of the NFT Factory in Paris.

The sign of a healthy sector 🔋.

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