Report: Crypto Craze Waning With Investors, Lenders Amid FTX Collapse

The recent collapse of the crypto exchange FTX might have been the proverbial last straw with major lenders financially backing the crypto craze.

According to The Wall Street Journal, a number of former "fans" of crypto exchanges are dropping out of the industry altogether.

For the month of November alone, crypto fund asset managers watched investors withdraw nearly $20 billion, or nearly 15% of total assets under management, according to the research firm CryptoCompare.

As part of that, the fund managers' collective has reportedly plunged to its lowest point in almost two years.

A few months ago, crypto had "exploded" in terms of value, pricing and media attention, with bitcoin "soaring" from a value of $9,000 in March 2020 to a peak price of $68,000 in November 2021.

Also, the JPMorgan Chase Institute reports the number of U.S. households that transferred funds into a crypto-related account jumped to 13% as of June 2022 -— up from 3% before 2020.

However, things have taken a tumble with crypto in the ensuing months.

"New customer additions have slowed ... because the trust of the industry has been damaged," Chris Kline, co-founder of Bitcoin IRA, which allows investors to trade crypto through retirement accounts, told the Journal.

Making matters worse, many people followed the so-called herd and bought crypto only when prices ticked higher, according to JPMorgan.

As such, many investors were likely to incur losses — in the absence of an unforeseen boom in the coming months.

Stephen Jones, 28, told the Journal he began buying cryptocurrencies in college. Jones posted some solid gains, but also "started having doubts over the past year," prompting him to sell some positions.

And then getting married in June motivated Jones to take a closer look at his finances, according to the Journal.

Jones cashed out his remaining holdings in October. Upon seeing FTX collapse shortly afterward, he said that experience "definitely opened my eyes a little bit. I'm not really seeing as much value-added activity as was initially promised."

The crypto traders believing the post-FTX collapse has merely encountered a "dip" phase are continuing to purchase cryptocurrencies, writes the Journal.

But still, it's a smaller group of go-getters than previous months.