Welcome back to our weekly recap of the movements in the crypto market over the past seven days.
Just when the industry started thinking Crypto Winter had passedthe sudden cinematic collapse of the crypto exchange FTX this week sent prices down the line.
Bitcoin (BTC) and Ethereum (ETH) crashed in sync, both losing roughly 20% of their value in the past seven days, according to CoinGecko data.
The world’s top cryptocurrency Bitcoin (BTC) is currently trading at $16,872, a price not seen since November 2020 when it began its pandemic-fueled bull run.
The second largest cryptocurrency by market capitalization, Ethereum (ETH), is trading today at around $1,274 – a low that last occurred in early July.
The steepest loss in the top fifty cryptocurrencies was felt by Solana (SOL) holders, who saw their pot shrink by 47% over the past seven days. SOL changes hands at $16.26.
FTX CEO Sam Bankman-Fried was one of Solana’s earliest supporters and also owned a large stock of SOL through his other crypto company, Alameda Research. SOL was the second largest coin holding of the disgraced hedge fund.
By and large, double-digit percentile losses were extremely common this week. XRP and privacy coin Monero (XMR) both posted similar losses for the two market leaders, with XRP starting the weekend at 38 cents and Monero trading at $127.
Big losses were also felt by Dogecoin (DOGE) holders, which are down 31% to $0.084633; Avalanche (AVAX) crashed 23% to $13.96, and Algorand (ALGO) fell 18% to 13 cents.
FTX total meltdown
Nobody saw this one coming – but they probably should have.
At the beginning of the summer, when Terra’s collapse triggered a wave of bankruptcies, Sam Bankman-Fried was the first industrial billionaire to open his wallet to offer bailouts left, right and centre.
On paper at the time he looked like he could afford it.
At the height of its wealth in March, Bankman-Fried was worth watering 26 billion dollars. In October last year Forbes called him”The world’s richest 29-year-old” and “the richest self-made newcomer in Forbes 400 history.” Fortune asked on the cover if he was “the next Warren Buffett”.
The picture broke this week. It started when Binance CEO Changpeng Zhao declared that he would move to liquidate his exchange the entire FTT stock—FTT is FTX’s native token—quoting “recent revelations” about FTX allegedly lobbying “other industry players behind their backs.”
Zhao’s chirping caused a bank run as FTX customers began withdrawing money from the exchange en masse. A huge one 6 billion dollars left FTX in 72 hours. To put that into perspective, the exchange typically handled “tens of millions” in withdrawals on an average day. In an all-too-familiar pattern, withdrawals were “effectively paused” due to the exchange’s liquidity problems. According to a source who has spoken to Reutersthe decision to freeze was taken right at the top.
The FTT token was wiped out during the week. On Sunday it was worth about $25. Today it is traded for almost one tenth of the price.
Things took an interesting turn on Tuesday when Binance entered a non-binding agreement to bail out FTX for an undisclosed amount. Zhao called the situation “very dynamic,” and clarifies that his exchange “has the discretion to back out of the deal at any time.” And that’s exactly what it did on next day. Zhao said FTX was “beyond our ability to help.”
It turns out that the potential restart of Zhao and Bankman-Fried’s crypto bromance was sunk by necessary due diligence. In a tweet statementBinance attributed its u-turn to the “recent news reports regarding mishandled customer funds and alleged investigations by US agencies” and said “the problems are beyond our control or ability to help.”
Throughout the week, several crypto companies denied any connection to the beleaguered FTX, including Coinbase, Circle, Tether and Maple Finance. However, as with Terra, the contagion will likely continue to spread.
On Wednesday, crypto-focused financial services firm Galaxy Digital announced it had one 76.8 million dollars exposure to FTX. The next day, crypto investment and trading group CoinShares said it had 30.3 million dollars in crypto locked up in FTX which it has not been able to withdraw so far.
The latest act of the FTX drama began on Thursday when the Securities Commission of the Bahamas, where FTX is headquartered, given an order to freeze FTX’s assets. The Bahamian regulator suspended the exchange’s operating registration and asked the Supreme Court to appoint a temporary liquidator.
The crisis ended Friday with the news that FTX filed for Chapter 11 bankruptcy. Alameda Research, together with the exchange’s American subsidiary FTX.US and approximately 130 affiliated entities will also file for bankruptcy.
Bankman-Fried has now stepped down from the role of CEO and veteran bankruptcy attorney John J. Ray III will fill his shoes. Ray previously led Enron through bankruptcy proceedings – an apt parallel.
This week the industry saw one of the fastest fortune contractions in history. In the coming months, the true extent of the damage will become clearer.
The disgraced former FTX boss tweeted on Friday: “I am really sorry, again.”
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