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The FTX fallout continued this week: Many crypto companies are also affected by the bankruptcy of the century through investments. And this is only the second week of the FTX disaster. So, crypto investors can expect things to get worse before things get worse. At least the two market leaders Bitcoin and Ethereum are no longer in free fall.
Bitcoin despite the downtrend
Bitcoin (BTC), the largest cryptocurrency by market cap, is down just 1% over the past week and is trading at $16,655. Ethereum (ETH), the No. 1 cryptocurrency 2, down about 4% to start weekend trading at $1,210.
The two cryptocurrencies rallied on Tuesday after the US Department of Labor’s latest PPI (Producer Price Index) report showed a decline in the cost of non-food items and energy. Many took this as a sign that US inflation may finally be easing, prompting the US Federal Reserve to ease its tight fiscal stance. The stock markets also reacted to the news with a recovery.
Several leading cryptocurrencies lost between 5% and 10% in value this week. These include Cardano (ADA), Polygon (MATIC) and the popular dog coins Dogecoin (DOGE) and Shiba Inu (SHIB).
It was Solana (SOL). The coin fell 17% to $13.31. FTX was one of the early backers of Solana and the input affected the entire Solana ecosystem. The blast radius included layoffs at the Solana Metaplex NFT protocol.
This is of course due to the extent of Solana’s network connections to Sam Bankman-Fried’s multi-billion dollar crypto empire – as well as statements of FTX exposure from several other industry leaders.
FTX: The bankruptcy puts pressure on other companies
As prices stabilized this week, there was some exposure within the industry. Several companies have announced how badly the FTX bankruptcy has affected them.
On Monday, for example, crypto lender BlockFi denied claims that much of its wealth was tied up in FTX. At the same time, however, the company informed its customers that withdrawals would continue to be paused, citing “significant exposure” to the fallen exchange.
BlockFi suspended customer withdrawals last week. The company is also considering filing for Chapter 11 bankruptcy – and likely layoffs.
Crypto hedge fund Ikigai has admitted via a tweet from founder Travis Kling that it has invested a “huge chunk” of its total assets in FTX. Kling also apologized for investing client funds in and “actively endorsing” FTX.
Unfortunately, I have some bad news to share. Last week Ikigai was caught up in the fall of the FTX. We had a large majority of the hedge fund’s total assets in FTX. By the time we went to withdraw on Monday mrng, we didn’t know much. We are now stuck alongside everyone else.
— Travis Kling (@Travis_Kling) November 14, 2022
The Solana Foundation was also influential
The Solana Foundation also published an article. In which she shares that she tied up $1 million in cash or equivalent assets in FTX. In addition, the foundation holds 3.24 million shares of FTX Trading LTD, 3.43 million FTT tokens and 134.54 million SRM tokens of decentralized exchange Serum. Bankman-Fried co-founded the Solana-DEX in 2020.
The foundation’s disclosure also explained how much Bankman-Fried invested in the network’s tokens. FTX and Alameda had together purchased 50.5 million SOL, which is currently valued at just under $666 million.
Also on Tuesday, crypto investment firm Sino Global said in an official statement that it had a “mid-seven” exposure to FTX but continued to operate as usual.
— Sino Global Capital (@SinoGlobalCap) November 15, 2022
Global Liquid Crypto Exchange on Tuesday froze all withdrawals, including fiat, “in accordance with the requirements of the voluntary filing of Chapter 11 of the United States.” Liquid Group and all of its subsidiaries, including Japan-based Quoine Corporation and Quoine Pte. in Singapore, which was acquired by FTX Trading Ltd earlier this year. built by an anonymous shop.
Circle, the USDC stablecoin issuer, admitted in a regulatory report that the “tiny equity position” in FTX that CEO Jeremy Allaire mentioned just after FTX’s collapse represented a $10.6 million investment. According to the filing, Circal expects its financial performance to be “materially lower” than the February guidance projected.
On Wednesday morning, crypto brokerage Genesis announced that it was suspending withdrawals from its borrowers, citing “unprecedented market turmoil” following the FTX bankruptcy. Just a week earlier, the company tweeted:
Serving our clients and preserving their assets is our #1 priority. Therefore, in consultation with our professional financial advisors and financial advocates, we have taken the difficult decision to temporarily suspend redemptions and new loan initiatives in the loan business.
— Genesis (@GenesisTrading) November 16, 2022
“Our working capital and net positions in FTX are not relevant to our business. The circumstances surrounding FTX have not affected the overall performance of our trading business.”
Blockchain analytics firm Chainalysis has also been identified as a creditor of FTX in documents filed with a Delaware bankruptcy court.
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