As soon as FTX revealed it had filed for Chapter 11 bankruptcy in the United States, cryptocurrency prices started to decline once more.
According to Coin Metrics, ether dropped 4.5% to $16,589.82 while bitcoin dropped 5% to $16,589.82. They each finished the week down 20.1% and 24.3%, respectively. Sam Bankman-Fried, the CEO of FTX, has also resigned, according to a statement Friday on FTX’s Twitter account.
Through his connections with prominent celebrities, authorities, and institutions, as well as his exchange service, Bankman-Fried rose to the status of the industry’s “white knight,” assisting in the popularization of cryptocurrency.
Investors are keeping an eye on the effects of the three-year-old FTX and its sister company, trading firm Alameda Research, but they are unsure of how much harm will be done to the rest of the market.
Alameda and FTX U.S. are two of the approximately 130 additional international businesses that have started the bankruptcy procedure.
During its most recent funding round, FTX was valued at $32 billion. Some of the biggest names in finance, including SoftBank, BlackRock, Tiger Global, Thoma Bravo, Sequoia, and Paradigm, invested.
“We are in the midst of another deleveraging event in the crypto ecosystem and it is so far having limited spillover to broader equity markets beyond sentiment, as crypto institutions lent to each other,” Morgan Stanley analyst Sheena Shah said in a note Friday.
“We expect another round of crypto QT” — or what the firm has previously described as the “crypto equivalent of quantitative tightening” — “with creditor exposures revealed in coming weeks,” she added. “These creditors are currently selling crypto assets to cover risks, adding to volatility.”
(Adapted from CNBC.com)