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Crypto Traders Face Another Huge Risk During FTX Contagion

  • Crypto traders are facing a fresh financial sector challenge despite the FTX issue.

  • Increased cryptocurrency market regulator pressure. Due to market volatility, traditional insurance firms are shunning FTX crypto investments.

20-Dec-2022 By: Ashish Sarswat
Crypto Traders Face

Despite the fact that the FTX crisis has been going on for quite 

Some time, crypto traders are now confronting a new obstacle in the conventional financial sector.

Even though the cryptocurrency market is still having trouble recovering from the FTX outbreak, there is a fresh and additional reason for traders to be concerned. Following the carnage that was seen on the market as a result of the failure of FTX, the values of cryptocurrencies have remained unchanged at the lowest levels in several months. This resulted in an increase in the amount of pressure that regulators put on the cryptocurrency market. Additionally, traditional financial firms in the insurance industry are avoiding crypto investments related to FTX due to the volatility of the market.

The FTX Contagion Effect Is Still Going Strong

In the most recent development, large insurance companies such as Lloyd's of London are limiting their coverage to customers who have exposure to foreign exchange (FTX). Due to the fact that there is still a significant distance to travel before achieving regulatory clarity on insurance coverage for crypto assets, this might have a domino effect on the entire cryptocurrency market. Insurance coverage is being denied to at least some of the funds that are connected to the Sam Bankman-Fried company. This applies not just to crypto traders but also to large firms that operate inside the industry, such as exchanges.

The most recent revelation from Reuters states that a number of "insurers are refusing or reducing coverage" to clients who have exposure to the insolvent cryptocurrency exchange. Because of this, cryptocurrency traders and exchanges run the danger of having their insurance coverage cancelled in the event of cyber attacks, exploits, or legal concerns.

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