The collapse of FTX last week will trigger significant market structure changes, namely moving away from a model of all-in-one platform centralization, crypto trading firm Cumberland said.
The various functions of crypto spot trading have been trending toward a model of all-in-one platform centralization, Cumberland's Head of Trading Jonah Van Bourg said on Twitter today. Van Bourg was referring specifically to liquidity, clearing, settlement, custody and lending. These functions were "coalescing under a very limited number of roofs."
Centralized exchanges had many incentives for pushing this all-in-one model. Van Bourg said that, in hindsight, some of these were "perverse."
Last week's developments — the collapse of FTX and its eventual chapter 11 filing — triggered a "handbrake turn," Van Bourg said. He added that the crypto market structure seems likely to mirror foreign exchange markets. Assets and capital aren't left on centralized exchanges in foreign exchange markets.
"Instead, digital assets will reside in countless silos around the world and the functions of custody, lending, settlement, clearing, and [most importantly] liquidity will be offered by an array of intermediary nodes and providers in an interconnected but non-interdependent web."
Disclaimer: The former CEO and majority shareholder of The Block has disclosed a series of loans from former FTX and Alameda founder Sam Bankman-Fried.
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