In November 2022, former cryptocurrency exchange FTX filed for bankruptcy after the company had mismanaged its funds. More than one million people may have lost money as a result of the collapse.
However, following FTX’s rapid fallout, some Northwestern students and faculty do not think the reputation of Blockchain, cryptocurrency’s underlying record transaction technology, or the industry itself will be negatively impacted long-term.
“There’s definitely doubts after the collapse of FTX in terms of the volatility of the industry,” Tony Luo, Weinberg senior and NU Blockchain Group president, said. “What’s the future of cryptocurrency or blockchain technology in general? But personally, I think it’s just part of the cycle of a relatively young industry where a lot of regulations haven’t been in place.”
Founded in 2017, NU Blockchain Group aims to be a hub for students interested in blockchain technology. The group, which organizes speaker events and works on blockchain projects, has not been entirely unaffected by the fall of FTX or the May 2022 Luna crypto crash, Luo said.
As a result of the Luna crash, Luo said the group has been unable to receive funding from a startup that previously supported it. Other groups or companies impacted by the market drops may also no longer opt to work with the student organization for projects or attend speaker events, Luo said.
Though NU Blockchain Group does not invest in cryptocurrencies as an organization, some involved students lost money as a result of the FTX fallout, organization treasurer and McCormick sophomore Eagan Notokusumo said. In response, he said the group’s priorities pivoted to support those monetarily affected.
“From the get-go we prioritized risk management in what we do, making sure that if we take on projects we do our due diligence and make sure they are not scams,” Notokusumo said.
He added that members of the NU Blockchain Group who had been involved with the cryptocurrency space since 2017 or 2018 were less doubtful of the industry following FTX’s decline and viewed the situation as just another market drop. However, newer members were more hesitant, and NU Blockchain Group saw a decline in meeting attendance late Fall Quarter as a result.
McCormick Prof. Dongning Guo, who teaches Computer Engineering 334: Fundamentals of Blockchain and Decentralization, said though the market value of cryptocurrencies using Blockchain has fluctuated throughout the past 10 years, people are still eager to invest in the currency.
Guo does not believe the recent tumult with FTX and Luna will deter people from investing in cryptocurrencies, although the practice still involves some level of risk.
“A lot of people who lost their money either way can afford it. This is their spare money investing in the market,” Guo said. “But there are of course also other people, so it’s sad that they lost a lot of their savings, and it’s very hard to get it back.”
He said there will likely be more regulations on cryptocurrency transactions in the future to prevent future cases of fraud, as was the case with FTX.
Newer industries, like cryptocurrency, are more prone to incidents of fraud, Guo said. But, given the decentralized nature of Blockchain technologies, he added that a company like FTX may have been appealing to investors because of its more centralized model.
Still, Guo said it is fortunate the FTX collapse was “relatively contained” and did not trigger market sell-offs like equity and bonds. Some cryptocurrency companies, like Bitcoin, have recovered all losses since FTX went bankrupt.
“The market is generally healthy in that sense and is resistant to just one big failure,” Guo said.
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