Proactive Investors - 12.22pm: Margin calls inevitable as FTX faces bankruptcy
The cryptocurrency markets face a “cascade” of margin calls from the crisis befalling Sam Bankman-Fried’s crypto empire, according to JPMorgan (NYSE:JPM) analysts.
SBF’s crypto exchange FTX, once the second largest in the world until just this week, has effectively ceased operating following a bruising bank run.
Contagion has spread throughout the entire crypto sector, causing bitcoin’s price to crash to US$16,000.
Some analysts warn of a further crash to US$13,000, a brutal -80% down from last November’s high of US$69,000.
Billions in long-Bitcoin positions could be wiped out, leaving retail and institutional investors with big losses.
According to coinglass.com data, US$231mln worth of bitcoin liquidations has occurred in the past 24 hours.
Once among the most esteemed figures in the crypto sector, now-disgraced SBF has warned investors of bankruptcy should a US$8bn blackhole fail to get filled.
“I f---ed up,” SBF told investors, according to a Bloomberg report, adding that he would be “incredibly, unbelievably grateful” if stakeholders could help.
Perhaps more tragic is the fate facing FTX customers, whose billions in assets are on tenterhooks.
The last time a major cryptocurrency exchange went bust was in 2014, when the once-leading bitcoin exchange folded.
Mt. Gox customers have yet to receive compensation.
11.34am: Solana smashed amid crypto contagion
Solana (SOL) is down 56% this week as sentiment in the crypto markets sours.
Having been in the top-10 digital currencies for over a year, the massive hit to its market cap has knocked Solana down to 15th place.
Embattled FTX and Alameda Research founder Sam Bankman-Fried has strong ties with the blockchain, showing just how toxic his name has become in a mere matter of days.
SBF recently came out batting for Solana in a year of hacks, exploits and dodgy performance issues, calling it the most “underrated token right now” in a Fortune interview.
SBF casts shade on SOL – Source: CoinMarketCap
He’s certainly not without skin in the game.
There’s the little issue of Alameda Research’s balance sheet being packed with SOL tokens, which he has purportedly been using as leverage.
In fact, so large is Alameda’s SOL stash that it represents around 20% of SOL’s circulating supply.
Now that SBF’s empire looks to be in dire straits, there are fears that he is poised to liquidate his entire SOL position.
No wonder the coin is crashing as investors seek to minimise their exposure.
As a venture fund, Alameda Research also participated in a US$314mln funding round for Solana Labs in 2021 and subsequently went to work on building the Solana-based decentralised exchange Serum.
Which brings us to another point: Serum (SRM) is the second-worst performing decentralised finance (DeFi) protocol across the entire cryptocurrency space, having lost over half its value in the past week.
Bitcoin takes the biggest nosedive in months amid an ongoing crisis in the crypto markets
Having agreed to rescue the FTX cryptocurrency exchange following a crushing bank run, Binance has pulled out of the deal, seemingly after acknowledging the dire state of its former competitor's financials.
Withdrawals remain frozen on the FTX platform and while bitcoin itself is largely unaffected, it has shaken confidence in the already tenuous marketplace.
Now changing hands below US$16,700, bitcoin is down 18% week on week; its lowest point since November 2020.
Bitcoin bulls will attempt to defend the US$16,600 support line.
Can bitcoin stabilise following yet another crypto crisis? – Source: currency.com
Ethereum has crashed nearly 25% in the past week to four-month lows on US$1,100.
Solana (SOL), which is linked to FTX founder Sam Bankman-Fried, is bearing the brunt of the latest bout of crypto contagion having plummeted over 50% in the past week.
As a result, the blockchain has lost its long-held position as a top-10 cryptocurrency.
Ripple (XRP) has had 20% of value carved from its market capitalisation.
Contagion was less severe among the other large-cap altcoins.
Polygon (MATIC) has managed to keep losses in the single digits, while Cardano (ADA), Polkadot (DOT), and Tron (TRX) are also faring comparatively well.
As for FTX Token (FTT), it has lost 90% of its market value since the crisis kicked into gear last Friday.
This spells disaster for Sam Bankman-Fried’s Alameda Research venture fund, which is mainly propped up by now-worthless FTT tokens.
FTT tanks from US$3.2bn to US$320mln – Source: CoinMarketCap
Dogecoin (DOGE) has all but lost the massive gains it recently saw following Elon Musk’s Twitter takeover.
The meme coin is 40% down week on week, bringing its market capitalisation to US$10.6bn.
All in all, global crypto market cap is sitting at US$830bn and while low values have been logged this year, there is a good change of more pain to come.
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