Nov 20, 2022
Crypto Markets Sag as Funds Drained From FTX Switch Out of Ether
(Bloomberg) -- Cryptocurrency prices slumped in the ongoing crisis sparked by the downfall of Sam Bankman-Fried’s once powerful FTX empire.
The largest token Bitcoin has shed as much as 4.7% to $15,485 on Monday, the least since November 2020. Second-ranked Ether is roughly 5% lower. Meme token Dogecoin -- a gauge of the most speculative sentiment in an already racy digital playground -- is down about 12% over the past two days.
Administrators are picking over the wreckage of the FTX bankruptcy, discovering that $3.1 billion is owed to top creditors. The scope of the money outstanding is stoking worries that more digital-asset outfits will topple.
Digital-asset brokerage Genesis is struggling to raise fresh cash for its lending unit, and it’s warning potential investors that it may need to file for bankruptcy if its efforts fail, according to people with knowledge of the matter.
Genesis, which has faced a liquidity crunch in the wake of crypto exchange FTX’s bankruptcy filing this month, has spent the past several days seeking at least $1 billion in fresh capital, the people said. That included talks over a potential investment from crypto exchange Binance, they said, but funding so far has failed to materialize.
Crypto lender BlockFi Inc. could be next: people with knowledge of the matter said last week that it’s preparing to file for bankruptcy within days.
“The FTX issues are really an urgent reminder of the need for regulatory clarity and a real regulatory framework for crypto,” Christian Catalini, founder of the MIT Cryptoeconomics Lab, said on Bloomberg TV.
He added that hype and speculation over the minting and trading of tokens “has generated a massive distraction from building actual products and services that reach consumers, solve actual problems.”
Ether has underperformed Bitcoin over the past couple of sessions in part amid speculation that some of the $663 million drained from FTX as it slid into bankruptcy is now being transferred out of the token.
The person or entity that raided FTX emerged last week as one of the world’s biggest holders of Ether, with a haul of about $288 million.
Blockchain specialist Chainalysis said in tweets Sunday that funds taken from FTX “are on the move” and some were being shifted from Ether to Bitcoin, likely as part of an effort to “cash out.”
The heady mix of corporate failure and potential criminality atop a 72% drop in a gauge of the top 100 tokens over the past year is naturally leading to all kinds of questions about the future -- or lack thereof -- for digital assets and their underlying blockchain technology.
Pershing Square Capital Management founder Bill Ackman said on Twitter that crypto represents less than 2% of his assets while adding that he remains positive on the sector overall, comparing its potential social impact to the telephone and the internet.
Bitcoin was trading at about $15,638 as of 2:40 p.m. in New York, a far cry from its November 2021 record high of almost $69,000. It touched a two-year low of $15,574 on Nov. 9. Ether was hovering around $1,082.
“We’ve got to get past this early stage of amateurs in crypto,” Bobby Lee, founder of crypto storage solution provider Ballet Global Inc., said on Bloomberg Television. He added that Bitcoin could fall as low as $10,000 if crypto markets are hit by more major blowups.
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