Crypto Markets Stabilize on Hopes for Muted Impact From FTX Rout
Cryptocurrencies regained some ground following Wednesday’s plunge, offering investors a respite from a rout fueled by Binance Holdings Ltd.’s withdrawal of its offer to buy FTX.com.
(Bloomberg) -- Cryptocurrencies stabilized after Wednesday’s plunge, regaining some of the losses fueled by Binance Holding Ltd.’s withdrawal of its offer to buy FTX.com.
Bitcoin rose as much as 14% to around $17,904, paring declines as data on Thursday showed US inflation cooled in October by more than forecast. The largest token by market value had already clawed back some of those losses before CPI data came out. It had dropped as low as $15,574 on Wednesday, to a level unseen since November 2020.
Meanwhile, Ether climbed 21%, while other altcoins outperformed the two larger tokens. Solana gained as much as 49% after losing roughly half its value in a week. Dogecoin jumped 30%.
There is no evidence that another other big fund or market maker in the crypto arena is facing similar distress as FTX, according to Ilan Solot, co‑head of digital assets at Marex Solutions.
While the fallout from FTX will not be isolated, “you could imagine a scenario in which there is no big concentrated loss -- where lot of people lose money, but nothing else breaks,” he said.
“The longer that nothing happens, the more confident markets get,” Solot said.
Crypto markets have been roiled by the saga involving FTX, which until just a few days ago was seen as one of the top entities, with charismatic founder Sam Bankman-Fried seen as the crypto’s version of John Pierpont Morgan. Its FTT token plunged amid concerns fueled by Twitter comments from Binance co-founder Changpeng “CZ” Zhao, and is now close to $4 after trading near $25 just a week ago. Bankman-Fried and Zhao co-announced a non-binding offer by Binance to buy FTX, which was then scrapped on Wednesday.
“Since I entered the crypto industry in 2016, very few periods tested its market infrastructure and participants” the way the turmoil of recent days did, said crypto hedge-fund manager Dan Liebau of Modular Asset Management.
Value Loss
Despite trimming losses on Thursday, Bitcoin has still plunged about 14% so far this week. It had reached a record high of almost $69,000 a year ago. FTT, the utility token of the FTX exchange, is down roughly 85% this week, and was trading around $3.46 as of 10:04 a.m. in New York.
The FTX-Binance saga calls to mind the turmoil involving Celsius -- the crypto lender that collapsed earlier this year -- as well as those seen by other firms that were engulfed in this year’s crash in digital assets.
The chaos also attracted the attention of regulators and legislators.
Read more: Lummis Has ‘Many Questions’ About Binance’s Takeover of FTX
“What we’ve seen in the last two days, if I can step back from it a bit, is really part of a pattern,” US Securities & Exchange Commission Chair Gary Gensler said on Bloomberg Television. “Investors get hurt when we don’t rely upon the time-tested public policy guardrails we’ve put in place over the decades.”
He cited opacity, using other people’s money, leverage and inter-connectedness as risks in the digital-asset sector.
As for potential effects, concerns about the recent events may deter some firms which were previously tempted to enter the space.
“This is going to give pause for more traditional financial institutions,” Soona Amhaz, general partner at Volt Capital LLC, said on Bloomberg Television.
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