Aftershocks from the massive earthquake in the trillion-dollar crypto industry last week continued to reverberate Monday.
Digital currency prices fell again as the crisis engulfing the market deepened over the weekend. Bitcoin, the world’s largest cryptocurrency, is down about 65% so far this year. It was trading at around $16,500 on Monday, according to CoinDesk. Analysts believe it could fall below $10,000.
ether, the world’s second most valuable cryptocurrency, isn’t doing much better. It was trading at about $1,230 on Monday, after falling more than 20% over the past week, CoinDesk data showed.
The drop comes as investors continue to grapple with the stunning implosion of FTX, one of the biggest and most powerful players in the industry.
Some industry insiders have said the company’s downfall had triggered a “Lehman moment,” referring to the 2008 collapse of the investment bank that sent shock waves around the world.
The episode has not only destroyed confidence in the crypto industry, but will also encourage global regulators to tighten the screws. Some of the biggest names in the business said they would welcome the scrutiny, if it helps restore faith in the industry.
There is “a lot of risk,” said Changpeng Zhao, who heads Binance, the largest crypto exchange. “We’ve seen things go crazy in the industry over the last week, so we need some regulation, we need to do it right,” he added.
CZ, as he is known, was speaking at a conference in Indonesia on Monday. He said last week that comparing the current crypto turmoil to the global financial crisis of 2008 is “probably an accurate analogy.”
Binance had reached an interim rescue agreement with FTX last year week, but that transaction fell through almost immediately.
FTX has continued its downward spiral after filing for bankruptcy on Friday. Another big name in the industry has also admitted to mishandling funds, further spooking investors.
This is how the last few days have unfolded, showing that the crisis has only 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 establish a comprehensive framework for crypto” at the time.
On Sunday, authorities in the Bahamas said they were investigating possible criminal conduct surrounding the company’s implosion.
“In light of the collapse of FTX globally and the provisional liquidation of FTX Digital Markets Ltd., a team of financial investigators from the Financial Crimes Investigation Branch are working closely with the Bahamas Securities Commission to investigate whether any criminal misconduct has occurred,” the Royal said. Bahamas police said in a statement.
It is unclear what specific aspect of the rapid collapse FTX authorities are investigating.
Bankman-Fried, the founder of the 30-year-old exchange, was one of the faces of the crypto industry, who amassed a fortune totaling $25 billion that has since disappeared. He had been seen as the white knight of the crypto world, previously stepping in to rescue struggling companies after the collapse of the TerraUSD stablecoin in May.
Backed by elite investors such as BlackRock and Sequoia Capital, FTX quickly became one of the largest crypto exchanges in the world. Its collapse was preceded by a decision to lend billions of dollars in client assets to finance risky bets by Bankman-Fried’s crypto hedge fund Alameda, The Wall Street Journal reported Thursday.
The Bahamas investigation came a day after the bankrupt stock exchange said it was launching an investigation of its own.
On Saturday, FTX said it was investigating whether crypto assets were stolen. Crypto risk management firm Elliptic said $473 million in crypto assets from FTX appears to have been taken.
FTX General Counsel Ryne Miller said on Saturday that the company “initiated precautionary measures” on Friday and moved all of its digital assets offline. The process was accelerated on Friday evening “to mitigate the damage of observing unauthorized transactions”.
Miller said FTX was “investigating abnormalities” regarding movements in crypto wallets “related to the consolidation of FTX balances on exchanges.”
The facts are still unclear and the company will share more information as soon as possible, he added.
As the scrutiny of big players in the crypto world increases, Singapore-based Crypto.com admitted to accidentally sending more than $400 million in Ether to the wrong account.
CEO Kris Marszalek said on Sunday that the transfer of 320,000 ETH was made three weeks ago to a corporate account at rival exchange Gate.io, rather than one of its offline or “cold” wallets “.
Although the funds were recovered, users are withdrawing their funds from the platform, fearing that it might collapse like FTX.
“We have since strengthened our processes and systems to better handle these internal transfers,” Marszalek tweeted on Sunday. According to CoinDesk, the platform’s native token has fallen more than 20% in the past 24 hours.
Marszalek said Monday that his firm has acted as a “responsible and regulated player since the beginning” and will soon “prove all the naysayers … wrong with our actions.”
Crypto.com has 70 million people on its platform worldwide and its business model is “completely different” from FTX, he added.
“We never take any third-party risk, we don’t run a hedge fund, we don’t trade client assets,” he said.
Marszalek said his company will soon release an audited report showing its reserves.
At the Bali conference, Binance chief Zhao noted that regulating the industry will not be easy.
“The natural response of the authorities is to borrow the regulations of traditional banking systems … but crypto exchanges operate very, very differently from banks,” he said.
“It is very, very normal for a bank to transfer users’ assets to invest and try to get returns,” he explained. If a crypto exchange works like that, “it’s almost guaranteed to go down,” he said. adding that the industry collectively had a role to play in protecting consumers.
“Regulators have a role … but no one can protect a bad player,” he said.
— Matt Egan, Ramishah Maruf and Allison Morrow contributed to this report.