Crypto winners and losers from the FTX fallout, according to Bernstein

Published Wed, Dec 7 202210:32 AM EST

Bernstein has sifted through the various sectors of the crypto industry and identified winners and losers for 2022. This year was a bad one all around for crypto. Bitcoin is currently sitting about 75% from its all-time high hit last November, and in a year of stubbornly high inflation, the cryptocurrency's potential to be an inflation hedge hasn't worked out. Being tied to stocks for much of the year, it continued to fall with other risk assets as the Federal Reserve hiked interest rates. It wasn't just the macro picture. Crypto suffered the added handicap of the financial contagion from the collapse of Terra in the first half of the year and FTX currently. Still, crypto had some bright spots, like this summer's long-awaited Ethereum merge . "When events like FTX happen, we often forget what still works within crypto and how far the crypto industry has come from the last down-cycle — the syndrome of throwing out the baby with the bath water," said Bernstein analyst Gautam Chhugani in a note Tuesday. Here's how different companies and projects fared in Bernstein's assessment: With FTX the obvious loser in the exchange category, Bernstein put Binance as a winner, citing its increased market share in the wake of the FTX storm and calling it a "systemically important" and financially robust exchange. Binance, which operates in a regulatory gray zone, will eventually become the "global consolidator" of smaller off-shore exchanges, Bernstein said. While FTX taught investors about the risks of storing crypto holdings with centralized entities, revelations in the stablecoin sector went the other way around. Bernstein's loser is Luna and the concept of algorithmic under-collateralized stablecoins. Regulated stablecoins won the category but controversial stablecoin Tether got a shoutout for surviving this year's market. Ethereum was a big winner. Investors were giddy about the merge for weeks leading up to it and although excitement faded following the successful upgrade, investors haven't priced in the upside from it, the analyst said. Solana, on the other hand, took a hit, stained by the fallout of FTX, a big and early backer of Solana. "We don't like to say this because blockchains, idealistically, are independent. But Solana, by associating itself so deeply with FTX/Alameda complex , did lose," said Chhugani. "When you centralize risk for a fundamentally, decentralized technology, you get hurt. And the truth is Solana DeFi got completely decimated, by associating with FTX/Alameda."