Crypto markets falter amid FTX exchange crisis

Cryptocurrency markets posted heavy losses on Thursday, with Bitcoin struggling to recover from a two-year low as investors worried about the fallout from crypto exchange FTX’s implosion and the future of the industry.

Bigger rival Binance bid farewell to a bailout for FTX on Wednesday. FTX chief Sam Bankman-Fried said he was exploring “all options” but dwindling hopes of a rescue left FTX reeling.

A message on the FTX website read: “FTX is currently unable to process withdrawals. We strongly advise against deposits.”

The focus is on the unknown levels of customer losses and the crisis in sentiment from the latest and possibly biggest meltdown in an industry that has turned into a minefield for investors.

FTX’s native token, FTT, is down 90 percent this week and attempting to stabilize at around $2 (€2) – not far above its record low of around $1.50. Bitcoin fell below $16,000 overnight for the first time since late 2020 and last traded at $16,700.

Binance has withdrawn from a non-binding offer to buy FTX following due diligence. Another exchange that refused to step in was OKX, which said it was also approached by Mr Bankman-Fried, who described $7 billion in liabilities that needed to be met quickly.

“Even Elon Musk would not be able to commit to a deal with $7 billion liability within hours of negotiations. It was too much for us,” Lennix Lai, director of financial markets at OKX, told Reuters.

“(It) is a big hole to fill,” he added. “The dagger will continue to hang over the crypto market as long as the prospects for FTX’s fate remain unclear.”

The seeds of FTX’s demise were sown months earlier in mistakes Mr. Bankman-Fried made after he stepped in to bail out other crypto firms, according to interviews with several people close to Mr. Bankman-Fried and communications from FTX and Binance.

There are also early signs that the fallout could spread beyond crypto markets as Wall Street stock markets jitterily slide.

“The failure of a top exchange — that’s on another level,” said Danny Chong, CEO of decentralized finance firm Tranchess, with potentially broader ramifications than the failures of stablecoin TerraUSD and crypto hedge fund Three Arrows Capital this year.

“People’s funds, including market makers, are still on FTX right now,” he said. “Just when people thought the crypto winter might not last…another episode like this is coming.”

According to a source with knowledge of the investigation, the US Securities and Exchange Commission is investigating’s handling of customer funds and crypto lending activities.

Investors are already writing off funds invested in FTX. Venture capital fund Sequoia Capital wrote down a $150 million commitment to zero on Wednesday. Canada’s Ontario Teachers Pension Plan, Tiger Global and Japan’s Softbank are also FTX investors. Crypto markets falter amid FTX exchange crisis

Fry Electronics Team

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