The fallout from the collapse of Sam Bankman-Fried’s FTX empire rattled digital assets for a second week, putting notable pressure on the sol token, which is down 19% for the week, and Silvergate, a commercial bank that specializes in cryptocurrency-related services, off more than 25%.
Since last Friday, when FTX and more than 100 affiliated companies filed for bankruptcy, cryptocurrencies have lost an additional $42 billion in market value.
Among the most depressed is sol, the token of the Solana
FTX was known to be a big investor in sol. Bankman-Fried infamously told a crypto trader during a January 9, 2021 Twitter debate about whether the token was overvalued: “I’ll buy as much SOL has you have, right now, at $3. Sell me all you want. Then go f**k off.” The token traded between $2.94 and $3.66 that day, according to Yahoo. The Financial Times reported that it had seen a balance sheet showing FTX held $982 million worth of sol on November 10.
Meanwhile, serum, the cryptocurrency of the Solana-based decentralized exchange Serum, which Bankman-Fried helped create, is hovering around 2 cents, down about 37% for the week, according to nomics. FTT, the token of the FTX exchange, has tumbled around 44% to $1.44.
Shares of Silvergate Capital, one of the crypto banks that FTX and affiliated entities had used, declined almost 11% on the day. Crypto-focused publication The Block reported Friday that FalconX, one of the industry’s largest prime brokers, will no longer use the Silvergate Exchange Network (SEN), according to a firm’s email sent to clients. On November 11, Alan Lane, Silvergate’s CEO, issued a statement saying the bank’s relationship with the embattled exchange was limited to deposits. The bank has also stated that FTX’s deposits represented less than 10% of the $11.9 billion in funds received from all digital asset customers.
Coinbase’s stock lost 7% Friday after Bank of America
Also embroiled in turmoil, the lending arm of crypto financial firm Genesis suspended new loan originations and redemptions Wednesday. Analytics firm Nansen said Thursday that blockchain data suggests that Genesis could have been a key lender to Alameda, the hedge-fund affiliate of FTX. According to a Wall Street Journal report, Genesis was seeking an emergency loan of $1 billion from investors before it told clients it was suspending redemptions.
Gemini, the crypto exchange owned by the Winklevoss brothers, subsequently froze withdrawals on its yield-generating Earn program since Genesis was its lending partner.
Crypto lender BlockFi, bailed out by FTX in July, has also suspended customer withdrawals, and is considering future steps. The company denied that the majority of its assets were held by FTX but said it did have significant exposure to the exchange and Alameda.
Exodus from Centralized Exchanges
Investors withdrew over $1 billion worth of bitcoin from centralized exchanges this week, according to data from Coinglass, a crypto analytics platform. Crypto owners are apparently moving to take custody of their assets rather than leave them with exchanges.
Research firm Kaiko said volume on decentralized exchange Uniswap V3 surged past many of its centralized peers in the aftermath of FTX’s collapse, gaining 13% in market share.
Additionally, hardware wallet manufacturers Ledger and Trezor reported significant spikes in sales of the devices last week.
At this moment, “it’s hard to estimate what the impact of FTX’s collapse will be,” says Ki Young Ju, CEO of crypto analytics platform CryptoQuant. “The biggest problem with this situation is that we’re losing people’s trust.”