Crypto Markets Buckle as FTX Bankruptcy Spurs Search for Casualties

Bitcoin, the most valuable coin by market capitalization, dropped more than 19% in the last seven days, trading at $16,774. Early last week, it was around $15,500. Several other cryptocurrencies also dipped, with FTX’s token FTT experiencing a worst-case 50% decline. The bankruptcy filing raised the possibility that hundreds of millions of dollars in customer deposits would be involved in a protracted legal dispute with an undetermined outcome.

Shares of other cryptocurrency-exposed companies were also losing ground, with Riot Blockchain Inc. down -1.48%, MicroStrategy Inc. down -35% in the last five days, and Marathon Digital Holdings Inc. down about -10.57% around noon in New York.

The collapse of Sam Bankman-crypto Fried’s empire, which was arguably the industry’s most visible and well-respected company just a week ago, is shaking the cryptosphere to its core. Urgent questions include which companies are involved with FTX and its sister company, Alameda Trading, through loans, investments, deposits, or other means.

According to FTX’s Chapter 11 filing, approximately 130 affiliated companies have initiated voluntary proceedings. However, the crisis has engulfed many others outside its immediate circle, including lender BlockFi, a troubled digital-asset lender once valued at $3 billion but now limiting activity on its platform. Late Thursday, the company halted client withdrawals, citing “a lack of clarity” regarding the status of FTX US, as well as the uncertainty afflicting FTX.com and sister trading house Alameda Research.

“I don’t think it’s done yet.” “Clearly, the crypto skylight is not positive,” Mike Wilson of Morgan Stanley said on Bloomberg TV on Friday.

For a long time, FTX and its subsidiaries were thought to be the cream of the crop in the cryptocurrency industry. The platform was used by both retail and institutional investors. After all, it was Bankman-Fried who stepped in to help over the summer when others had failed. He had previously been compared to John Pierpont Morgan.

He socialized with Tom Brady and Gisele Bündchen.

His business bought the naming rights to the Miami Heat arena and ran advertisements during the Super Bowl.

But now that an entire industry is pressing for explanations, confidence in him has diminished.

“You’re seeing this wealth destruction,” said Academy Securities’ head of macro strategy, Peter Tchir. “It affects all direct investors and, secondly, it affects everyone involved in the environment.” You should consider where you keep your money, how transparent they are, and where they are domiciled.”

Genesis is receiving a $140 million equity infusion from its parent company, Digital Currency Group, after revealing that its derivatives business has $175 million in funds locked in an FTX trading account. In addition, Anthony Scaramucci stated that his firm, SkyBridge Capital, is attempting to repurchase the 30% stake in his company that FTX purchased months before the crypto exchange imploded.

Meanwhile, Sequoia Capital wrote down the entire value of its $214 million investment in FTX, and the debacle has ensnared some of finance’s biggest names. Hedge funds such as Tiger Global Management, Third Point, and Altimeter Capital Management have recently participated in funding rounds for the once-flying crypto exchange.

The full scope of the damage will take weeks, if not months, to play out. Thousands of retail investors with funds on the platform have also been impacted.

The Bahamas, where the cryptocurrency exchange is headquartered, has frozen FTX’s assets. The bankruptcy filing indicates that its creditors will be disclosed soon, at the very least.

“The collapse and bankruptcy of FTX is a watershed moment for the crypto industry,” said Craig Johnson, Piper Sandler’s chief market technician. “FTX’s failure will result in more rules and regulations around the world.” These new rules will eventually be a positive catalyst for crypto adoption and will provide the industry with much-needed adult supervision.”