Cryptocurrencies have suffered further heavy selling this week following the near-collapse and bailout of FTX, one of the world’s biggest crypto exchanges.

FTX saw mass withdrawals this week that triggered a “significant liquidity crunch” for the exchange, and the company has pinned its hopes on a rescue deal with one of its largest competitors, Binance. FTX’s own currency, FTT also suffered a crash this week, losing a staggering 80% in value.

Binance were clear that although they have put in an initial offer to buy the firm, they reserved the “discretion to pull out from the deal at any time.” Where that would leave FTX and the many investors holding funds with the company remains to be seen, and once again highlights the risks of the unregulated nature of crypto assets.

191122 Bitcoin Price Chart

The collapse is another blow for cryptos after a difficult year which has left investors questioning the relevance of these assets over the past 12 months. The crypto mining boom of 2020 and 2021 has largely petered out as regulation and high energy prices drive out miners, while price collapses in various currencies and NFT markets has left many with significant losses. Proponents had suggested cryptos could offer a hedge against inflation, but this year’s performance has left little doubt this is not the case.

The collapse has seen major cryptos drop significantly in value. Bitcoin is down over 16% in the past five days, and Ethereum is down 27.23%. For Bitcoin this is its lowest price since December 2020, and the current rout shows no signs of stopping at the moment.

Gold meanwhile is still enjoying its recent rally, up 6.25% in USD in the past week. The dollar is seeing some weakness as US Midterm elections take place, and markets wait to react to the new political landscape in the US for the next two years. With so many investors pulling out of cryptos they will likely be looking for new places to park their money, and could be turning to precious metals given recent performance in comparison.