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Tyler Cowen

Crypto Can Survive the Possible Demise of FTX

For many true believers, crypto exchanges are a sellout and a concession to older methods of finance and settlement.

Lines on charts can also go down.

Lines on charts can also go down.

Photographer: Michael M. Santiago/Getty Images North America

As the drama surrounding FTX and Sam Bankman-Fried continues to unfold, most people are focused on the immediate questions of what exactly happened and why. I would like to ask some larger questions about where the crypto universe and its clearinghouses might be headed, given this radical change in the landscape.

One question is whether crypto exchanges are bound to evolve into a natural monopoly. By one estimate, if Binance and FTX had merged, the combined firm would have accounted for four-fifths of the market. If FTX disappears, it is no longer clear how to measure the new market size, though it’s clear Binance would be a fairly dominant firm. And the troubles at FTX do not seem to have shaken Binance’s perceived stability.