FTX Collapse Triggers Crypto Market Consequences

The collapse of FTX in 2022 set off a chain reaction that had far-reaching consequences for the cryptocurrency market. According to a recent analysis by Willy Woo, the bankruptcy of FTX triggered a series of events that quietly drained value from retail crypto holders, causing altcoins to struggle while Bitcoin surged.

Woo's study reveals how hedge funds took advantage of the situation by purchasing locked tokens at discounted prices and then shorting SOL futures to hedge their exposure. This resulted in a near risk-free return of 70-80% for these funds, combining staking yields, basis yields, and token discounts.

However, retail investors were unaware of this dynamic and bought into the market at elevated prices, absorbing the losses. Woo argues that similar arrangements spread across the broader crypto ecosystem, affecting project backers and foundations as well.

The result was a stark contrast between Bitcoin's performance and altcoins'. While BTC dominance climbed to 55-60% during this period, its price surged past $88,000 by late 2025. In contrast, altcoins struggled, weighed down by hidden sell pressure.