FTX announced that FTX, its affiliated cryptocurrency trading fund, Alameda Research, and approximately 130 other companies have begun voluntary bankruptcy proceedings in Delaware under Chapter 11.
Market reaction:
comment:
Dennis Dick, Market Structure Analyst and Trader at Triple D Trading
“Because the bankruptcy filing happened right before trading began, the entire stock market actually fell as well.”
“A lot of the bad news was already priced in. You would think these stocks would fall significantly on this news, but in reality, many stocks have come out of deep declines. There was buy-in. ”
Thomas Hayes, Managing Member, Great Hill Capital LLC, New York
“It's all about selling rumors. Now we have news. What was feared is now done and even though I see cryptocurrencies starting to find a bottom in the coming days I wouldn't be surprised.”
“What was shocking was that this guy was the face of the crypto industry, and then it turned out that the Emperor wasn’t wearing any clothes. And the real risk going forward is that an asset class with no backing “I think it's a loss of trust in the team.” ”
Jay Hatfield, CEO, Infrastructure Capital Management, New York
“When a bankruptcy is announced, Bitcoin tends to drop pretty significantly, and most crypto-related stocks like MicroStrategy tend to drop, because MicroStrategy owns Bitcoin.”
“Well, they've already been hit pretty hard, and with the inflation reports, they're trending higher overall. All of these securities are high data, high risk, so if the market goes up, it's going to get worse. It will rise.”
Joseph Edwards, Securitization Capital Investment Advisor
“The main danger here is that a US entity is involved, which essentially means that the risk of infection jumps into an area that would otherwise be contained, and at that point The regulatory implications bring us much closer to the existential question.”
“The failure here is essentially a failure of the industry structure rather than an asset class failure, but once U.S. organizations and authorities start getting involved, the differences between the two begin to blur.”
Eric Chen, Injective Labs CEO and Co-Founder
“Given that the SBF is a major funder of elections (sixth largest funder overall), today’s events are likely to cause a ripple effect across the regulatory environment, and therefore politicians. are likely to have negative feelings toward future centralized virtual currency exchanges.
“Washington has lost its most important voice in the crypto industry, and it is unclear who exactly will fill the gap in the short term. Driven primarily by sudden liquidations, this volatility will likely last for a long time. I don’t think so.”
“The events of the past few days only further fuel the broader decentralization narrative and how important it is for users to have unrestricted access to their funds at any time. In the long term, cryptocurrencies will become more wary of centralized platforms and exchanges, which will be a huge boon for decentralized finance as a whole.”
Omid Malekan, Adjunct Professor, Columbia Business School
“The ‘content’ of this latest crisis appears to be that FTX did things with customer funds that an exchange should not have, and that some amounts are currently missing. We need more detailed information to know what the fraud was and how much we can recover.”
“The ‘how’ is even more difficult to answer because unlike Terra, which has always been questionable, or Celsius, which like any financial institution could face execution, FTX is almost universally Because it was perceived to be safe, especially after playing a white knight to other failures.'' SBF, the CEO of the crypto industry, has played a leadership role on regulation and more, but who knows? It seems almost pathological that the company would work with Congress to clean up an industry while at the same time perpetrating massive fraud. Stop believing in cults of personality, no matter how well-intentioned they may seem. ”
Richard Gardner, CEO of Modulus Global, a software provider to large Wall Street clients
“It is certainly not surprising that FTX found itself in this situation in the first place. SBF's laissez-faire approach to industry consolidation was not planned from the start. If anything, we are still at the beginning. Finding the best deals associated with the most desirable financial institutions required a waiting game as a surefire way to incur this type of risk. It’s unlikely to bring any calm to the house.”
Greg Kidd, co-founder of VC firm HARD YAKA
“Sam and FTX were playing a great long-term strategy game (chess). Unfortunately for them, CZ and Binance chose to play a short-term tactical game (checkers), leaving them with weak liquidity in Alameda. The focus has been on concentration.'' When FTX crossed the line in trying to help Alameda price the shock that could be caused by CZ/Binance selling certain assets, A trap has sprung and brought the entire SBF ecosystem to its knees. ”
“CZ and Binance last month pushed back by delisting Coinbase and Circle’s USDC from their exchanges in favor of their own stablecoins, curbing liquidity in the world’s second most popular stablecoin. Highlander's hard-line tactics continued on this day, strengthening the hands of Binance, which is the second and third largest player in the industry.
“It’s a tough world, but it’s getting rougher. In the long run, CZ/Binance will be held accountable for its generous compliance controls that have benefited the likes of Russia’s Silk Road and served as a conduit for money laundering profits in the North. You may face your own backlash, Korean hackers.”
John Griffin, CEO and founder of INTEGRA FEC, which provides consulting to government agencies and law firms investigating financial fraud, and professor of finance at the University of Texas.
“The next question is how broadly this will ripple to other exchanges and where the next potential losses could occur.
“Typically there is a lot of cross-collateralization going on. So if a major entity like that goes bankrupt, that's the extent to which all the assets associated with that FTX exchange will fall. It's a kind of major financial crisis, and the administrators and assets associated with FTX may go down.
“There is a lack of trust in the cryptocurrency space, so you don't know if someone will go bankrupt or you might not be able to withdraw your cryptocurrency (from other players). You could withdraw it and put it on a cryptocurrency.'' That would remove a lot of the cross-collateralization and leverage in the system, putting downward pressure on the price of the cryptocurrency and potentially causing other players to fail. So this could be something like a financial crisis in the crypto space.
“It appears that Alameda is short on billions of dollars in debt, which means they owe someone billions of dollars.So the party that suffered the loss has to pay other organizations Other entities have an incentive to basically dump all of their counterparties, just as they would if they wanted to get out of a derivatives transaction they've ever made. , you have to turn everything back into cash. As other cryptocurrencies raise funds, there will be downward pressure on cryptocurrencies.
sign up here.
Compiled by the Global Finance & Markets Breaking News team. Editing: Richard Chan
Our standards: Thomson Reuters Trust Principles.
