This Week in Pieces: FTX Goes Bankrupt, Bitcoin Falls to Two-Year Low CryptoBlog

This Week in Pieces: FTX Goes Bankrupt, Bitcoin Falls to Two-Year Low CryptoBlog

This week in parts. Illustration by Mitchell Preffer for Decrypt.

Welcome to our weekly recap of crypto market movements over the past seven days.

Just when the industry was starting to think about Crypto Winter had passedthe sudden cinematic collapse of crypto exchange FTX this week sent prices plummeting across the board.

Bitcoin (BTC) and Ethereum (ETH) crashed in sync, both losing around 20% of their value in the past seven days, according to data from CoinGecko.

The world’s first 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 cap, Ethereum (ETH), is trading today at around $1,274, a low that last occurred in early July.

The biggest loss in the top fifty cryptocurrencies was felt by holders of Solana (SOL), who saw their pot shrink by 47% in the last seven days. SOL changes hands at $16.26.

FTX CEO Sam Bankman-Fried was one of Solana’s earliest backers and also owned a large amount of SOL through his other crypto company, Alameda Research. SOL was the second-largest coin portfolio of the disgraced hedge fund.

Generally speaking, double-digit percentile losses were extremely common this week. Both XRP and privacy coin Monero (XMR) saw similar losses for the two market leaders, with XRP starting the weekend at 38 cents and Monero trading at $127.

Significant losses were also felt by holders of Dogecoin (DOGE), which is down 31% at $0.084633; Avalanche (AVAX) fell 23% to $13.96 and Algorand (ALGO) fell 18% to 13 cents.

Total FTX Fusion

No one saw this one coming, but they probably should have.

In early summer, when Terra’s collapse sparked a wave of bankruptcies, Sam Bankman-Fried was the industry’s first billionaire to open his purse strings to offer bailouts. left, right and center.

On paper, at the time, he looked like he could afford it.

At the peak of his fortunes in March, Bankman-Fried was worth the drizzle $26 billion. In October last year, Forbes I called him “World’s richest 29-year-oldand “the richest self-made newcomer in Forbes 400 history.” Fortune asked on his cover if he was “the next Warren Buffett.”

The image cracked this week. It all started when Binance CEO Changpeng Zhao said he would liquidate his exchange. all FTT assets—FTT is the native token of FTX—quoting “recent revelationsabout FTX allegedly lobbying “other industry players behind their backs.”

by Zhao Tweeter caused a bank run when FTX customers began to withdraw funds from the exchange en masse. A standard $6 billion left FTX in 72 hours. To put it into perspective, the exchange usually processed “tens of millions” of withdrawals in an average day. In an all-too-familiar pattern, withdrawals were “effectively suspended” due to the exchange’s liquidity issues. According to a source who spoke to Reutersthe decision to freeze was made at the very top.

The FTT token was cleared during the week. On Sunday it was about $25. Today it is trading 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”, clarifying that his exchange “has the discretion to withdraw from the agreement at any time”. And that’s exactly what he did on The next day. Zhao said FTX was “beyond our ability to help”.

It turns out that Zhao and Bankman-Fried’s potential crypto-bromance revival has been bogged down by the necessary due diligence. In a tweet statementBinance attributed its reversal to “the latest news reports regarding mismanaged client funds and alleged investigations by US agenciesand said “the issues are beyond our control or our ability to help.”

Throughout the week, several crypto firms have disavowed any ties to the beleaguered FTX, including coinbase, circle, tether and Maple Finance. However, as with Terra, the contagion should continue to spread.

On Wednesday, crypto-focused financial services company Galaxy Digital announced that it had a $76.8 million exposure to FTX. The next day, crypto investment and trading group CoinShares said it had $30.3 million in crypto locked in FTX which he has not been able to withdraw so far.

The final act of the FTX drama began on Thursday when the Bahamas Securities Commission, where FTX is headquartered, issued an order to freeze FTX assets. The Bahamian regulator has suspended the registration of stock exchange operations and asked the Supreme Court to appoint a provisional liquidator.

The crisis ended on Friday with news that FTX filed for Chapter 11 bankruptcy. Alameda Research, along with the exchange’s U.S. subsidiary FTX.US and approximately 130 affiliated entities will also file for bankruptcy.

Bankman-Fried has now stepped down as CEO, and veteran bankruptcy attorney John J. Ray III will take his place. Ray previously guided Enron through its bankruptcy proceedings – an apt parallel.

This week, the industry witnessed one of the fastest wealth contractions in history. In the coming months, the true extent of the damage will become clearer.

The disgraced former FTX CEO tweeted on Friday, “I’m really sorry, once again.”

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