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Fall of FTX: ‘This is the worst’ time for crypto this year. Here’s what you need to know

Hello, welcome to Distributed Ledger, our weekly crypto newsletter that hits your inbox every Thursday. I’m Frances Yue, crypto reporter at MarketWatch. It was a historic week for crypto. In today’s episode, I’ll try to break down what happened and its potential impact.

Find me on Twitter at @FrancesYue_ to send feedback, or tell us what you think we should cover.

You can also reach me via email to share your stories, especially if you still have funds on FTX, or have recently withdrawn them.

Crypto at a Glance

BitcoinBTC USD,
+14.59%
has lost 19% in the past seven days and was trading at around $17,240 on Thursday, according to data from CoinDesk. Ether ETHUSD,
+21.08%
fell 24.5% over the seven-day period to around $1,267. Dogecoin DOGEUSD Meme Token,
+26.55%
was trading down 38%, while another dog-themed token, Shiba Inu SHIBUSD,
22.18,
was down 15.8% from seven days ago.

Cryptographic metrics
The biggest winners

Price

%return in 7 days

B OK

$20.04

24.4%

Polygon

$1.08

23.7%

PAX Gold

$1,740.15

6.8%

Base

$0.05

2.9%

gold tie

$1,716.09

1.9%

Source: CoinGecko as of November 10

The biggest losers

Price

%return in 7 days

FTT

$3.51

-86%

Solana

$16.75

-45.6%

Tokenize Xchange

$10.25

-44.9%

WhiteBIT Token

$6.78

-33.7%

Aptos

$4.89

-33.5%

Source: CoinGecko as of November 10

What happened

FTX, once the third-largest crypto exchange by trading volume and a white knight for several struggling crypto companies earlier this year, is in an insolvency crisis.

The exchange, once valued at $32 billion, is facing a shortfall of up to $8 billion, according to several media. Without cash injection, the company could plunge into bankruptcyaccording to a Bloomberg article.

Contagion

The rather fledgling crypto industry is already battered this year, as it has seen the collapse of blockchain Terra, lender Celsius, and hedge fund Three Arrows. Over $50 billion in market value EarthUSDTerra and Luna coin were wiped out in May, while Three Arrows, which at one point managed up to $10 billion in assets, filed for bankruptcy in July.

Still, FTX’s collapse is “the worst” for the crypto industry so far this year, analysts said.

“Everyone trusted FTX,” CoinRoutes co-founder Ian Weisberger told MarketWatch. During market turmoil earlier this year, FTX acted as a white knight for several beleaguered digital asset companies earlier this year, including Voyager and BlockFi.

Ian Katz, Managing Director of Capital Alpha Partners said Chris Matthews of Marketwatch.

The FTX crisis is also putting more pressure on the crypto market. On Wednesday, bitcoin fell to $15,552, the lowest level since November 2020, before rebounding to around $17,240 on Thursday.

“For a time after that, which could be months, investors will be hesitant to re-enter the market for fear there is another shoe to drop,” said Matthew Hougan, chief investment officer at Bitwise Asset Management.

Lily: Investors fear potential FTX bankruptcy could spill over to crypto and stock markets

Still, some industry players hope the incident could help eliminate excessive leverage in the crypto space and push regulators to write clearer policies, which could spur institutional adoption of digital assets.

Read also :‘Is there anything about crypto that is what it seems?’ FTX Failure Threatens Industry Reputation in DC

Representatives for FTX did not respond to a request for comment.

What was FTX’s problem?

FTX’s liquidity crunch began to unravel after Binance, the world’s largest exchange, said on Nov. 6 that it would begin liquidating its remaining FTT tokens, FTX’s native token, held on its books. Binance held around 23 million FTT tokens, according to a report from Bloomberg.

Earlier this week, FTX turned to rival OKX, and possibly Binance, for help. Binance signed a letter of intent on Tuesday to buy FTX’s non-US assets, before dropping a deal a day later.

What appeared to be the deeper issue was that FTX allegedly loaned money to its affiliate trading company Alameda, using the funds clients had deposited on the exchange for trading.

Bankman-Fried, reportedly told an investor this week that the company had extended loans about $10 billion to Alameda, according to a Wall Street Journal article citing an unnamed source. This represented more than half of FTX’s client assets of $16 billion, according to the report.

The exchange saw about $5 billion in customer withdrawals on Sunday, Bankman-Fried tweeted Thursday.

Fall of the “King of Crypto”

Not so long ago, Bankman-Fried, often known as “SBF”, was one of the world’s youngest billionaires, referred to by some as the “John Pierpont Morgan” in crypto. His curly hair, signature style with shirts and shorts on business occasions, and a bean bag in the office, where he spent most nights, made headlines in major financial publications.

In less than five years, Bankman-Fried built a personal fortune that was estimated at its highest ever at over $26 billion, while his empire evaporated almost overnight. “I screwed upand should have done better,” he wrote in a Twitter thread on Thursday.

Lukas I. Alpert of MarketWatch documented the rise and fall of Bankman-Fried.

Crypto companies, funds

Shares of Coinbase Global Inc.. PIECE OF MONEY,
+10.74%
jumped 9.5% on Thursday to around $50.36, down 9.8% over the past five trading sessions. by Michael Saylor MicroStrategy Inc.
MSTR,
+2.72%
shares gained 4.3% on Thursday to $177.74, after being down 28.5% in the past five days.

mining company Blockchain Riot Inc. RIOT,
+10.61%
shares rose 6.4% to $5.21 on Thursday, down 5.4% in the past five days. Shares of Marathon Digital Holdings Inc.
MARA,
+3.85%
edged up 0.1% to $9.63 and was down 8.4% in the past five days. Another miner Ebang International Holdings Inc.. EBON,
+3.56%
saw the shares fall 0.3% to $0.30 on Thursday, as they are down 6% over the past five days.

Overstock.com Inc.
OSTK,
+13.84%it is
shares gained 13.3% to $25.05. The shares traded up 18.2% over the five-day period.

Shares of Block Inc.
SQ,
+17.71%,
formerly known as Square, rose 15.8% to $66.23 and was up 22.9% for the week. Tesla Inc.. TSLA,
+7.39%
shares rose 5% to 186.55%, down 13.4% in the past five days.

PayPal Holdings Inc.
PYPL,
+10.32%
jumped 8.7% to $85.54, up 11.7% over the five-session period. Nvidia Corp.
NVDA,
+14.33%
shares gained 12.7% to $155.19, a 15.7% gain in the past week.

Advanced Micro Devices Inc.
AMD,
+14.27%
shares rose 13.8% to $68.22 on Thursday, up 13.5% from five trading days ago.

Among crypto funds, ProShares Bitcoin Strategy ETF
BITO,
+12.84%
jumped 8% to $10.45 on Thursday, while its Bitcoin Short Strategy ETF
COCK,
-13.52%
fell 8.6% to $41.44. Valkyrie Bitcoin Strategy ETF
BTF,
+13.67%
took 9.2% to $6.55, while VanEck Bitcoin Strategy ETF
XBTF,
+13.46%
rose 7.6% to $16.55.

Grayscale Bitcoin Trust
GBTC,
+7.70%
rose from 5.9% to $9.26.

Required readings

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