Crypto markets in turmoil following the bankruptcy of FTX

Nov 11 (Reuters) – Crypto exchange FTX filed for bankruptcy in the United States on Friday and Sam Bankman-Fried resigned as CEO, after a liquidity crisis prompted the intervention of regulators around the world .

FTX, its affiliate crypto trading fund Alameda Research, and about 130 other companies have begun voluntary Chapter 11 bankruptcy proceedings in Delaware, FTX said.

MARKET REACTION:

Shares of cryptocurrency and blockchain-related companies fell on Friday after FTX, one of the largest crypto exchanges, announced it would file bankruptcy proceedings in the United States, triggering a potential meltdown. massive in the industry.

COMMENTS:

DENNIS DICK, MARKET STRUCTURE ANALYST AND TRADER AT TRIPLE D TRADING

“The bankruptcy filing took place just before the opening, which also sent the entire stock market down.”

“There was a lot of bad news already priced in. You would think these stocks would be down significantly on this news, but a lot actually made up for the loss significantly. The downside was bought.”

THOMAS HAYES, MEMBER MANAGER AT GREAT HILL CAPITAL LLC IN NY

“It’s selling the rumour. Now we have the news. What was feared is now done and I wouldn’t be surprised if in the next few days you see crypto starting to bottom out.”

“The shock was that this guy was the face of the crypto industry and it turns out the emperor had no clothes on. And I think the real risk going forward is that trust is lost in an asset class that is not backed by anything and that ‘it will be something that has to be played out.’

JAY HATFIELD, CEO OF INFRASTRUCTURE CAPITAL MANAGEMENT IN NEW YORK

“Bitcoin fell when bankruptcy was announced quite substantially and that tends to drag most crypto-related stocks like MicroStrategy down because they own Bitcoin.”

“Well, they’ve taken a pretty big hit already. And overall, we’re in an uptrend after the inflation report. All of these headlines are high data, high risk, so if the market goes up, it will drive them higher.”

JOSEPH EDWARDS, INVESTMENT ADVISOR AT SECURITIZE CAPITAL

“The main danger here is that the US entity is involved – this basically means that the risk of contagion is now jumping into areas that were meant to be isolated, at which point it becomes much closer to an existential issue because of the implications regulatory.”

“The failure here was essentially a failure of industry structures rather than a failure of the asset class, but when US entities and authorities start to get involved, the difference between the two starts to fade. ‘fade.’

ERIC CHEN, CEO AND CO-FOUNDER OF INJECTIVE LABS

“Today’s events are likely to have ripple effects on the regulatory environment as SBF was a major election donor (sixth overall donor) so politicians are likely to have a negative impression of the exchanges centralized cryptos in the future.

“Washington has lost one of the most important voices in crypto and I’m not sure who will fill that void in the near term. I suspect this volatility will be short-lived as it’s mostly driven by sudden selloffs.

“I think the events that have unfolded over the past few days only further fuel the larger narrative of decentralization and how important it will be for users to have unrestricted access to their funds at all times. In the long run, I think crypto participants will be even more wary of centralized platforms or exchanges, which will be a major boon for decentralized finance as a whole.”

OMID MALEKAN, ASSISTANT PROFESSOR AT COLUMBIA BUSINESS SCHOOL

“The ‘what’ of this latest crisis appears to be that FTX did things with client funds that an exchange shouldn’t have and now some amounts are missing. We need more details to find out what the irregularity was exact and how much can be recovered.

“The ‘how’ is even harder to answer because unlike a Terra, which was always debatable, or a Celsius, which like any lender could face a run, FTX was almost universally perceived as safe, especially after playing the white knight to other failed crypto players the SBF CEO had played a leading role in things like regulation, and it almost seems pathological that someone is running a massive fraud while simultaneously working with Congress to clean up the industry. Ultimately, the lesson here is that the crypto industry needs to stop trusting personality cults, however well-meaning they may be.”

RICHARD GARDNER, CHIEF EXECUTIVE OFFICER OF MODULUS GLOBAL, A SOFTWARE PROVIDER FOR MAJOR WALL STREET CLIENTS

“FTX finding itself in this position to begin with is certainly no surprise. SBF’s freewheeling approach to industry consolidation was ill-conceived from the start. acquisitions, we are at the beginning of the economic crisis. Finding the best deals associated with the most desirable institutions was a waiting game. Aiming for the moon so fast was a surefire way to invite this kind of risk, and , while not a surprise, it certainly won’t appease retail investors.”

GREG KIDD, CO-FOUNDER OF VC FIRM HARD YAKA

“Sam and FTX were playing a brilliant long-term strategic game (chess). Unfortunately for them, CZ and Binance opted to play a short-term tactical game (checkers) which put FTX in the spotlight on liquidity concentrations at Alameda who were vulnerable to price shocks that CZ/Binance could trigger by dropping particular assets.When FTX crossed the line in an attempt to help Alameda weather the storm, the trap was set, bringing everyone to their knees. SBF ecosystem.

“CZ and Binance flexed their muscles last month by removing Coinbase and Circle’s USDC from their exchange, removing liquidity from the world’s second most popular stablecoin in favor of their own stablecoin. °3 of the industry.

“It’s a hectic world that just got tougher. Longer term, CZ/Binance might have its own edge on its lenient compliance checks which have benefited the Russian version of Silk Road well and been a conduit for laundering proceeds for North Korean hackers.”

JOHN GRIFFIN, CEO AND FOUNDER OF INTEGRA FEC, WHICH PROVIDES ADVICE TO GOVERNMENT AGENCIES AND LAW FIRMS INVESTIGATING FINANCIAL FRAUD, AND PROFESSOR OF FINANCE AT THE UNIVERSITY OF TEXAS

“The next question is how big of a contagion effect is this going to have on other exchanges and where the next potential losses may occur.

“Usually there’s a lot of cross-collateralization. So to what extent when you have a major entity like this go down, all the assets tied to that FTX exchange go down. That’s kind of the big financial crisis.You have people who have their custodians or assets linked to FTX.This could lead to someone else’s downfall.

“You lack confidence in crypto so you don’t know if someone else will go bankrupt and you may not be able to withdraw your crypto (from other players). Investors might withdraw their crypto from exchanges and put it on This would then remove a lot of cross collateral, a lot of leverage in the system, put downward pressure on crypto prices and could cause other players to fail. therefore look like a financial crisis in the crypto space.

“It looks like Alameda is missing billions of dollars in obligations. That means they owe someone billions of dollars. So those parties, as they suffer losses, could cause them to wipe out other entities and those entities could wipe out other entities.You have an incentive to bust all counterparties, you want to eliminate counterparty risk, like you want to get out of all the derivatives trades you You’re pulling everything in hard cash, so you can sell bitcoin or other crypto to raise funds, which puts downward pressure on the crypto.

Compiled by the Global Finance & Markets Breaking News team; Editing by Richard Chang

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