The aftershocks from the massive earthquake in the trillion dollar cryptocurrency industry last week continued to be felt on Monday.
Prices of digital currencies fell again as the crisis that engulfed the market deepened over the weekend. Bitcoin, the largest cryptocurrency in the world, has plummeted by around 65% this year. It was trading at around $ 16,500 on Monday, according to CoinDesk, and analysts believe it could drop below $ 10,000 in the coming days.
Meanwhile, the world’s second most valuable cryptocurrency ethereum isn’t faring much better. It was trading at $ 1,231.53 on Monday, after dropping more than 20% in the past week, data from CoinDesk showed.
The plunge comes as investors continue to grapple with the extraordinary implosion of the FTX Group, one of the largest and most powerful players in the industry.
Some industry insiders have said that the company’s downfall triggered a “Lehman moment”, referring to the investment bank’s 2008 crash that caused shockwaves around the world.
Not only did the episode destroy confidence in the cryptocurrency industry, it will also encourage global regulators to tighten the screws. Some of the biggest names in the industry have said they will welcome control if it helps restore confidence in the industry once again.
There is “a lot of risk,” said Changpeng Zhao, who runs the cryptocurrency exchange Binance. “In the last week we have seen things go crazy in the industry, so we need some regulations, we have to do it right,” she added.
The Binance boss, known as CZ, spoke at a conference in Indonesia on Monday. Last week he said comparing the current cryptocurrency turbulence to the 2008 global financial crisis is “probably an accurate analogy.”
Zhao was a key player in the events surrounding the fall of FTX. Binance had reached a rescue attempt with FTX earlier week, but that transaction almost immediately fell apart.
FTX continued its downward spiral over the weekend after filing for bankruptcy on Friday. And another big name in the industry that admits it mismanaged funds, scaring investors even more.
This is how things have unfolded in the last few days, demonstrating the fact that the crisis has just begun.
FTX moved its headquarters from Hong Kong to the Bahamas last year, with former CEO Sam Bankman-Fried hailing it as “one of the few places to build a complete cryptocurrency framework” at the time.
On Sunday, Bahamian authorities said they were investigating potential criminal misconduct surrounding the company’s implosion.
“In light of the global FTX collapse and the interim liquidation of FTX Digital Markets Ltd., a team of financial investigators from the Financial Crimes Investigation Branch is working closely with the Bahamas Securities Commission to investigate if misconduct has occurred. criminal, “the Royal Lo said in a statement to the Bahamian police force.
It is unclear what particular aspect of the rapid collapse of FTX authorities they are investigating.
Bankman-Fried, the 30-year-old founder of the exchange, was one of the faces of the cryptocurrency industry, amassing a fortune once totaling $ 25 billion that has since vanished. He had been seen as the white knight of the cryptocurrency world, having previously stepped in to bail out struggling companies following the collapse of the TerraUSD stablecoin in May.
FTX, backed by elite investors such as BlackRock and Sequoia Capital, has quickly become one of the largest cryptocurrency exchanges in the world. Its collapse was preceded by the decision to lend billions of dollars of client assets to finance risky bets by Alameda, FTX’s cryptocurrency hedge fund, the Wall Street Journal reported.
The investigation in the Bahamas came a day after the bankrupt exchange said it was launching a separate investigation.
On Saturday, FTX said it was looking into whether crypto assets had been stolen and has since moved all of its digital assets offline. Crypto risk management firm Elliptic said that although the theft was not confirmed, $ 473 million in crypto assets were apparently stolen by FTX.
In a tweet earlier Saturday, FTX general counsel Ryne Miller said the company “has initiated precautionary measures” and has moved all of its digital assets to cold storage. The process was “expedited” Friday night “to mitigate damages after observing unauthorized transactions,” Miller said in a tweet.
Miller finally said Friday that FTX was “investigating anomalies” regarding movements in crypto wallets “related to the consolidation of FTX balances between exchanges.” The facts are still unclear and the company will share more information as soon as possible, he added.
As the control of the big players in the cryptocurrency world increased, another serious incident alarmed investors over the weekend. Singapore-based Crypto.com admitted to accidentally sending more than $ 400 million in ethereum to the wrong account.
Its CEO, Kris Marszalek, said on Twitter Sunday that the 320,000 ETH transfer was made three weeks ago to a corporate account at competing exchange Gate.io, rather than to one of its offline or “cold” wallets.
And despite the funds being recovered, users are withdrawing from the platform fearing the same outcome as FTX.
“We have since strengthened our process and systems to better manage these internal transfers,” Marszalek tweeted on Sunday. The platform’s native token has dropped more than 20% in the past 24 hours, according to CoinDesk on Monday.
At the Bali conference, Binance boss Zhao signaled that regulating the sector will not be easy.
“The natural response of the authorities is to borrow regulations from traditional banking systems … but cryptocurrency exchanges work very, very differently from banks,” he said on Monday.
“It is very, very normal for a bank to shift user resources for investment and try to make returns,” he explained. If a cryptocurrency exchange works this way, it is “almost guaranteed to go down,” she said, adding that the industry collectively has had a role to play in consumer protection.
“Regulators play a role … but no one can protect a bad player,” he said.
– Matt Egan, Ramishah Maruf and Allison Morrow contributed to this report.