The world’s second largest crypto exchange files for bankruptcy, and trading platforms provide proof of reserves to halt the liquidity crisis. Will the crypto market recover? These stories and more this week in crypto.
Crypto Exchange FTX Filed For Bankruptcy
After shocking the industry with a liquidity crisis, FTX has filed for bankruptcy in the U.S. A statement detailed that FTX and around 130 affiliated firms have commenced voluntary proceedings to provide the FTX Group the opportunity to assess its situation and maximize recoveries for stakeholders. Sam Bankman-Fried has stepped down from the role of CEO.
Binance Walked Away from FTX Rescue
Just a day after Binance CEO, Changpeng Zhao announced that he had reached a nonbinding deal to buy FTX’s non-U.S. businesses, Binance did an about-face and backed out of the deal, effectively forcing FTX to file for bankruptcy.
Millions of Tokens Blacklisted Following FTX Hack
Several wallet addresses linked to FTX were found transferring millions of dollars worth of cryptos without an official notice just a day before the bankruptcy filing. Within hours, FTX confirmed on Telegram that the fund transfers were part of an ongoing hack. Tether proactively blacklisted $31 million worth of USDT tokens linked to the transactions.
Crypto Exchanges Prove Reserves
To calm worried investors and prevent bank runs, crypto exchanges have started issuing proof of reserves to halt the outflow of assets from their platforms. Binance confirmed they have over $70Bn spread across Bitcoin, Ethereum, BNB and stablecoins. Meanwhile, Crypto.com revealed that it holds 20% of its reserves in Shiba Inu – a highly speculative meme coin with no apparent utility.
FTX Investors Suffer
A long list of investors now suffer from the collapse of FTX, including the world’s largest asset manager, BlackRock. Sequoia invested in a $420 million round in the company last year while other venture investors, even Canada’s Teacher’s Pension Fund, are among the entities that lost big in the collapse of the exchange.
FTX Supporters Plunge Into Losses
Over the past couple of years FTX had managed to attract a ton of celebrities. NFL quarterback Tom Brady and basketball star Steph Curry are just a couple of the high profile names of its former partners. Mercedes Formula One suspended its sponsorship with FTX prior to its upcoming race in Brazil. Binance chief Changpeng Zhao, has warned that more companies may fail in the coming weeks resulting from the demise of FTX.
The White House Weighs in on the FTX Collapse
The White House and the Senate Banking Committee have called for proper crypto regulation following the collapse of FTX. White House press secretary Karine Jean-Pierre commented that it is crucial that financial watchdogs look into what led to FTX’s collapse, to fully understand the misconduct and abuses that took place.
Volatility Rises Following the FTX Crisis
Strategists at JPMorgan said in a note to clients that the FTX crisis injects significant volatility into the crypto market, calling it crypto’s “Lehman moment”, referring to the 2008 collapse of the investment bank. The strategists stated that this situation could be more problematic, as entities with strong enough balance sheets to be able to rescue low capital, high leverage firms in the crypto ecosystem are becoming harder and harder to find.
That’s what’s happened this week in crypto, see you next week.