FTX Collapse Aftermath: Western Crypto Sector Hard Hit, Competitive Landscape Poised for Reshaping
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FTX Collapse Aftermath: Western Crypto Sector Hard Hit, Competitive Landscape Poised for Reshaping
When black swans keep company with deep bears, will the crypto power structure be reshuffled?
Navigating Web3 tides with focused insights
"A major Western fund had already committed to our project, but now they've gone silent and are holding back," lamented a founder of a blockchain project.
The storm triggered by FTX’s collapse is sweeping across the entire crypto world. Exchanges, VCs, and project teams alike are feeling the aftershocks.
With cumulative liabilities of $9 billion; over 70 invested institutions suffering $2 billion in write-downs; and top-tier Western firms like Multicoin, Genesis, and Paradigm caught in the fallout…
The bankruptcy of FTX has dealt a severe blow to Western crypto power, partially leveling the previously lopsided balance between Eastern and Western forces.
As black swans accompany deep bear markets, will the power structure of the crypto industry be reshuffled?
Western Crypto Power Suffers Heavy Blow
In 2019, FTX emerged out of nowhere. Within just three years, it grew into a $32 billion unicorn—raising over $2 billion across four funding rounds, backed by more than 70 investors including Sequoia Capital, Paradigm, Singapore’s sovereign wealth fund Temasek, the Ontario Teachers’ Pension Plan (Canada), SoftBank, and Tiger Global.
Yet overnight, as the FTX empire crumbled, $2 billion in investments vanished.
Sequoia Capital disclosed in a letter to LPs that its two funds wrote down their total investment of $213.5 million in FTX and FTX US to zero.
Paradigm informed LPs that its $290 million exposure to FTX was fully written off. Co-founder Matt Huang publicly apologized for the investment decision.
Ontario Teachers' Pension Plan (OTPP), managing retirement funds for 330,000 teachers in Canada, announced it had invested C$95 million in FTX and FTX US over the past two years, representing less than 0.05% of its total net assets.
SoftBank wrote down its FTX investment to zero, stating its stake was “under $100 million.” Former COO Marcelo Claure admitted on social media his failure regarding the FTX investment—driven by FOMO and lacking full understanding of what he was investing in.
Temasek also disclosed writing off its $275 million investment in FTX, noting it had conducted an eight-month due diligence process from February to October 2021. This marks Temasek’s largest-ever crypto investment to date.
Even Multicoin, long closely tied to FTX, could not escape unscathed. Beyond losing $25 million invested in FTX.US, around 10% of its assets remain frozen within FTX.
So too have assets related to the Solana ecosystem plummeted alongside FTX. In a letter to investors, Multicoin revealed its fund value dropped 55% in the past two weeks due to the FTX collapse, and pessimistically predicted that the ripple effects from FTX/Alameda would spread further, leading many trading firms to shut down or be eliminated.
And indeed, this has come to pass.
FTX’s core clientele consisted primarily of professional traders and institutional clients. Many projects, after securing funding, chose to deposit their capital with FTX to earn 5% annual interest—an arrangement particularly common among DeFi projects promising high yields.
Michael Wagner, CEO of Star Atlas—a game metaverse built on Solana—stated that Star Atlas had significant cash exposure at FTX, with operational funds halved.
The Solana Foundation disclosed it held approximately 3.24 million shares of FTX Trading LTD, about 3.43 million FTT tokens, and roughly 134.54 million SRM tokens in its FTX.com account.
Kevin Zhou, founder of quantitative hedge fund Galois Capital, informed investors that nearly half of Galois Capital’s assets—over $100 million—are trapped in FTX and cannot be withdrawn.
Multiple institutions including Coinbase, Crypto.com, CoinShares, and Galaxy Digital have disclosed their risk exposures to FTX, totaling over $200 million.
Meanwhile, amid a wave of redemptions triggered by the FTX collapse, Genesis, a leading crypto lending and brokerage firm, announced on November 17 that its lending arm had suspended client withdrawals and new loan originations.
According to Bloomberg, Genesis is seeking a $1 billion emergency loan from investors and warned potential lenders that if fundraising fails, the company may need to file for bankruptcy protection. Should Genesis collapse, another wave of liquidations and bankruptcies would sweep through the industry.
Reshuffling East-West Power Dynamics
"After FTX, capital power between Asia-Pacific and Europe/U.S. has become relatively balanced," remarked crypto investor Evans on social media.
As outlined above, the FTX collapse severely damaged key Western crypto players, whereas most crypto institutions in the Asia-Pacific region were largely spared.
Since DeFi Summer, the crypto world has seen a trend of "rising West, declining East." Both entrepreneurs and VCs in the Asia-Pacific region found themselves in an awkward position. On one hand, APAC VCs wanted to invest in overseas star projects; on the other, APAC startups hoped to secure backing from prominent Western VCs. Despite mutual skepticism, both sides ultimately had no choice but to work together.
Western crypto funds dominate because they hold pricing power, lead narratives, and operate in tight alliances—particularly evident in their coordinated investments in the Solana ecosystem.
The FTX implosion and its ripple effects have shattered this once-powerful coalition.
With FTX Ventures bankrupt, Multicoin and Jump severely weakened, Paradigm—despite its independence—also heavily impacted, Polychain inactive, and Pantera and CoinFund reporting massive paper losses in letters to LPs.
Currently, only a16z remains relatively stable, though still facing significant paper drawdowns.
VC pricing power stems from brand reputation and fund size. This chain of collapses has gradually stripped away the "golden aura" surrounding major Western crypto funds.
Notably, many Western crypto funds rely heavily on Asian LPs. High-net-worth Asian family offices typically allocate capital by first investing in several well-known international blue-chip funds, reserving remaining capital for local APAC crypto VCs.
This dynamic has left both new and established APAC crypto VCs in a difficult fundraising position. During bullish markets, LPs often FOMO into Western GPs first; during downturns, LPs pull back entirely—even retracting prior commitments. If domestic fundraising falters, overseas fundraising becomes even more unlikely.
Post-FTX, Asian LPs must abandon their previous over-glorification of Western star funds, consoling themselves with thoughts like, "We’re here to learn from the market."
The same applies to startups. Overseas projects tend to excel at storytelling, adept at turning small ideas into grand narratives, while APAC projects focus more concretely on product fundamentals.
In Evans’ view, the FTX explosion reflects the habitual “laziness” of Western funds—skipping proper due diligence and relying solely on narrative-driven decisions.
Long-term, this black swan event could benefit APAC crypto VCs and founders. There's hope that APAC LPs will keep capital within Asia, APAC VCs will support local entrepreneurs, and during the next bull cycle, a new Mega Fund will emerge from the Asia-Pacific region.
However, many investors still believe “pricing power won’t shift so easily,” acknowledging there’s still a long way to catch up with the West.
"The scale of U.S. fundraising and VC investment is at least ten times larger than Asia’s. For example, Katie Huan’s new fund is already $2.5 billion—larger than the combined total of mainstream Asian funds. Narrative leadership in investment will remain U.S.-led," said a family office manager.
Another North America-based hedge fund partner, 0x992, echoed this sentiment: asset pricing power remains dominated by Sand Hill Road in Silicon Valley (a reference to the hub of top U.S. venture capital). Their LP fund flows are stronger and more stable. Except for Dragonfly and Hashkey, most Greater China VCs have mediocre fundraising capabilities.
“If even Western capital loses confidence in this market, then only a few exchanges’ capital will remain to support it.”
Moreover, despite Solana’s downturn, foundational decentralized infrastructure such as Ethereum and Layer2s remain predominantly Western-led. The Asia-Pacific region will likely continue playing the role of follower.
Is Confidence Still Alive?
Will the FTX incident damage traditional capital’s confidence in investing in Web3/Crypto?
The answer seems to be yes.
If PayPal and Terra’s collapses previously dealt heavy blows to some traditional investors’ wallets and trust, then the bear market combined with FTX’s bankruptcy delivers a second devastating strike, compounding the damage.
Previously, constrained by differing fundraising capacities, the primary market showed a pattern of “cold East, hot West”—APAC institutions barely participated, while Western VCs remained active, even willing to pay premium valuations.
Now, the primary market has fallen into full-blown depression. A founder raising funds overseas sighed: the FTX collapse has triggered a chain reaction—one Western fund that previously committed to his project has now entered a wait-and-see mode.
A symbolic moment occurred on November 12, when Dallas Mavericks owner Mark Cuban unfollowed nearly all crypto-related Twitter accounts—including Mintable and Dapper Labs, companies he had invested in. Prominent KOL Cobie jokingly replied, “Thanks for buying tokens from us at the top—we’ll have more for you in a few years.”
Mark Cuban represents the mindset and fate of many external celebrities who entered the space—joining during bull-market FOMO, passionately promoting Web3/Crypto, seemingly more faithful than OG insiders, only to quietly exit when the bear market arrived.
Ironically, when we reached out to numerous traditional investors, most responses indicated they still maintained confidence, faith, and optimism: “A faster bottoming-out in the bear market actually creates better opportunities for institutions and traditional investors to enter.”
Stella, a partner at a U.S.-dollar fund that participated in early investments in FTX and Solana, stated they have not changed their investment direction and continue actively backing relevant projects.
“Crypto cycles are extremely pronounced—massive bubbles inflate, and crashes or corrections hit painfully hard. But VCs won’t miss out on this game, especially early-stage Silicon Valley VCs whose entire model is built on betting for outsized returns.”
Yet for seasoned veterans who’ve lived through multiple cycles, they welcome the departure of speculative traditional investors.
“Every cycle repeats itself—bulls and bears alternate, people come and go. Only by flushing out speculative traditional investors can the bear market truly bottom out.”
Regardless, the landscape of the crypto world has already been broken and restructured by this black swan.
There are never permanent winners in this world. In this deep bear market, everyone waits with anticipation for new heroes and the arrival of a new cycle.
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