As if crypto was not already having a tough year with the global stock market crash, it now has a new woe to deal with: Binance pulling out of the FTX merger deal.
On November 8, both crypto exchange companies’ CEOs publicly announced that Binance would buy its rival FTX, as the latter suffered from a liquidity crunch. However, FTX’s problem-ridden balance sheet and reports of the US SEC (Securities and Exchange Commission) investigating FTX CEO Sam Bankman-Fried for mishandling customer funds at his other trading business Alameda Research dampened Binance’s excitement.
Binance pulled out of the deal, and just like that, crypto’s price plummeted again, with Bitcoin reaching its lowest value since December 2020.
Closer to home, here’s three ASX-listed companies with exposure to Bitcoin that might have to reevaluate their crypto ventures seeing the current state of the digital currencies.
SelfWealth (ASX: SWF)
For the past year, online broking company SelfWealth has been working on adding crypto products to its platform. Announced in July 2021, the Company made things official by signing an agreement with BTC Markets in February this year to provide access to select cryptocurrencies on its platform. Development expenses to provide such service and meet strict compliance regulations if offered, contributed to a loss of over $6 million in FY22.
SelfWealth had planned to launch this new addition in June 2022; however, the less-than-supportive environment held it back. Plus, seeing how crypto is faring right now, it might want to keep that decision on hold for now.
DigitalX (ASX: DCC)
FinTech company DigitalX bought Bitcoin in its early stages. In fact, since the Company launched in 2014, it has been actively involved in the Bitcoin space, enabling activities like mining. In 2019, the Company decided to set up a Bitcoin fund for its wealthier investors to get in on the action. It put in up to $2 million worth of Bitcoin of its own. Initially, it was all uphill, especially as crypto boomed at the start of Covid-19. However, since this year’s crash, the returns have been minimal. As of its October 2022 update, Bitcoin recovered somewhat, ushering in returns of over 4%. However, over the past 12 months, returns have fallen about 50%. And this new merger fallout might further affect its performance this month. Since the downfall, DigitalX has taken a defensive stance regarding crypto investing.
DigitalX’s Bitcoin fund aimed to help people get exposure to the crypto world—thankfully, it made no promises of the exposure being a positive one.
Raiz (ASX: RZI)
Raiz is a micro-investing app that offers Bitcoin as an investment option. The Company adopted Bitcoin in May 2020, offering investors exposure to Bitcoin through its Sapphire portfolio. It enabled investors to dabble in the crypto, allotting it 5% with the rest of the portfolio comprising traditional large-cap stocks. Micro-investing is big among younger users who want to start their financial journeys. However, it doesn’t look like they will look for a Bitcoin portfolio anytime soon, seeing how the crypto has been falling consistently.
The challenges that these companies face don’t hold a candle to what dedicated exchange-traded funds (ETFs) are about to witness. For instance, BetaShares Crypto Innovators ETF (ASX: CRYP)—launched in 2021—does not directly invest in cryptos but instead in crypto exchanges.
Since the announcement of the broken merger, the ETF’s price has fallen by over 10% to $1.97.
Depending on what happens to FTX, it might fall further. In FY22, the ETF experienced a loss of over $160k. Holding assets worth over $46 million in the crypto exchange space, the dedicated crypto ETF has too much to lose in case crypto collapses again.
Crypto’s year has just been a string of bad luck, from crypto Terra Luna’s devastating crash to US$0, launching a domino effect on other cryptocurrencies to merger ups and downs. The crypto world is on edge to find out what happens with the FTX and crypto at large in the coming months.
We hope for crypto investors’ sake that—even if it doesn’t get better any time soon—it doesn’t get worse.
Alinda is a Business Reporter for The Sentiment
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