Bankruptcy filings by Celsius and Voyager have raised questions about what happens to investors’ crypto when a platform fails.
Rafael Henrique | Sopa pictures | Lightrocket | Getty Images
Cryptocurrencies were under pressure for another day on Wednesday as the market digested the fallout from Binance̵[ads1]7;s planned bailout of FTX.
Bitcoin was last down 5% to hit a new bear market at $17,019.14, according to Coin Metrics. It hit its all-time high of $17,585.25 a year ago Thursday. Etherfell 10% to $1,152.34.
The The Solana Token continued his slide. It was last down 30%, after plunging 26.4% on Tuesday. Alameda Research, the trading firm owned by Sam Bankman-Fried, which also runs FTX, was a big and early supporter of the Solana project.
“Market factors such as providing SOL token liquidity as well as support for Solana ecosystem projects on FTX exchange have been a key driver of Solana’s success,” Bernstein’s Gautam Chhugani said in a note on Wednesday. “This is an undesirable event for the Solana ecosystem in the short term. Furthermore, given FTX/Alameda’s balance sheet situation, there may be pressure on the Solana inventory in the short term as the situation resolves.”
The crypto market rose briefly on Tuesday after Bankman-Fried, also known as SPF, announced that Binance will buy its non-US businesses, but fell shortly after.
The SBF empire quickly unraveled after a report last week revealed that a large portion of Alameda’s balance was concentrated in FTX Token (FTT), the original token of the FTX trading platform. After some sparring on Twitter with SBF, Binance CEO Changpeng Zhao announced that his company was delisting FTT from its books, leading to a run on the popular FTX exchange and a liquidity crisis.
FTT was down 10% on Wednesday, after falling more than 75% the previous day.
The bomb will likely set the crypto industry back, but to what extent remains to be seen. Analysts anticipate further regulatory scrutiny of offshore exchanges, where the majority of crypto derivatives trading takes place. It is also unclear how much financial contagion will enter the rest of the market.
In addition, Bankman-Fried had recently been hailed as an industry “white knight” when he came to the rescue of crypto services firms such as BlockFi and Voyager that barely survived the crypto contagion this spring.
For newcomers to the crypto market, he and FTX became the faces of the industry, secured the naming rights to the Miami Heat basketball team’s stadium last year, brought on Tom Brady and Giselle Bündchen as ambassadors for the company, and became a mega-donor to the Democrats. policy.
“Given the public-facing nature of FTX CEO Sam Bankman-Fried and the size of FTX, we believe this week’s events could lead to some loss of consumer confidence in the crypto industry, beyond what was seen in the wake of 3AC, Celsius, and Voyager- events that took place earlier this year,” especially if the contagion takes hold and crypto prices continue to fall, KBW analysts said in a note on Tuesday. “It may take time for customers to regain trust in the industry, by and large (and we think regulation can help this).”